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Summary: It sounds impossible, but the math proves otherwise. The secret isn’t in chasing higher returns, it’s in the one lever you actually control. Most investors don’t realise this until it’s too late.
Most Indian investors enter the markets with a single objective of chasing returns. The mindset of “higher the return, better the portfolio” is turning into an obsession. Cue the conversations at family gatherings or office canteens: “Arre, mere fund ne 18 per cent diya.”
“Bas? Mere dost ke fund ne 22 per cent diya hai!” (“Hey, my fund has delivered 18 per cent.” “That’s it? My friend’s fund gave 22 per cent!”).
Of course, nobody invests to earn low returns. And why should they? That’s kind of the entire purpose of investing, isn’t it?
But what I am pointing out is the uncomfortable obsession with chasing returns, because it can actually distract you from the one thing we can truly control.
While returns are important, they are not in your hands. Markets are moody, businesses cycle go through ups and downs and even the best fund manager can’t promise a fixed percentage every year.
What you can control, however, is how much you save and invest.
And if you focus on that lever, you’ll be surprised at how much power you hold over your financial future.
Higher savings rate beats higher returns
Let’s put this into perspective with a simple story.
Imagine two friends, Amit and Bharat. Amit invests Rs 10,000 every month through SIPs and earns a steady 12 per cent return. Bharat, on the other hand, boasts of a sizzling 20 per cent annualised return, but invests only half as much, Rs 5,000 a month.
Now, here’s how their wealth builds up:
- After three years: Amit is way ahead. His disciplined savings give him Rs 4.3 lakh, while Bharat’s “high-return” portfolio is at just Rs 2.4 lakh. Lesson? Savings rate matters more than return rate.
- After five years: Amit’s lead continues. He has Rs 8.1 lakh, much more than Bharat’s Rs 4.9 lakh. Bharat’s higher returns are working, but Amit’s larger contributions still dominate.
- After 10 years: Amit’s corpus continues to remain superior. Despite Bharat’s impressive 20 per cent returns, he has only Rs 17.2 lakh, while Amit’s steady 12 per cent SIP has compounded to Rs 22.4 lakh. Amit’s savings habit keeps him in front for an entire decade.
- Only after 15 years, does Bharat finally overtake Amit, with Rs 47.7 lakh compared to Amit’s Rs 47.6 lakh. But that’s a 15-year wait! That’s incredibly long for a 20 per cent-generating portfolio to go past a relatively more humble portfolio.
Now, here’s the uncomfortable question: how many investors can really stick around for 15 years without losing steam? Especially when, for the first decade, their “hot” 20 per cent portfolio still feels like it’s underperforming compared to a steady 12 per cent? Many would quit out of frustration.
And that’s assuming Bharat actually manages to earn 20 per cent annually over 15 years. Because over 15 years, such returns are very difficult to sustain. Even if they are achieved, the ride will be stomach-churning. Massive crashes, long flat stretches, sudden spikes. It takes nerves of steel to survive that without bailing out.
So, don’t get dazzled by friends flaunting 18–20 per cent screenshots. Focus on saving more, investing consistently and building a portfolio you can stick with through thick and thin.
Savings rate is the real lever
Here’s a simple framework:
- If you save just 10 per cent of your income, expect to work for around 40 years before you can retire comfortably.
- Bump that up to 20 per cent, and your retirement horizon shrinks to about 30 years.
- Push it to 30 per cent, and you could be financially free in roughly 24 years.
- And if you manage to save 50 per cent of your income, you’re looking at just 15 years to retire securely, without worrying about running out of money in your later years.
Our take
This is not to say that returns don’t matter. Of course they do. They are the fuel for wealth creation in the long run. But returns are not under your control. What is under your control is:
- How much you save and invest every month.
- How long you stay invested.
If you get these two right, you don’t need to pray for your fund to generate 20 per cent annualised returns over 15, 20 and 30 years. You’ll have built enough of a cushion through disciplined saving and compounding.
The risks of 20 per cent returns
Most investors spend years chasing that elusive “20 per cent fund”, only to realise much later that it’s not returns, but savings and simplicity that actually move the needle. That’s exactly why you should read this:
This article breaks down why the simplest investment strategy is often the most powerful. No complicated jargon, no chasing fads, just the clarity you need to build wealth without losing sleep.
And if you want to go one step further, our book Money, Markets & Mistakes is your essential guide to avoiding the classic investing traps that derail most portfolios. If you’ve ever worried about repeating someone else’s mistakes, this book is the shortcut you need.
This article was originally published on September 10, 2025.
Disclaimer: This content is for information only and should not be considered investment advice or a recommendation.
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