Power of Compounding - Secret to Become Rich

Power of Compounding – The Secret to Become Rich

Compound interest is the eighth wonder of the world. He who understands it earns it and who doesn’t pay it”

– Albert Einstein

The exponential increase in the value of the investment due to earning interest on both principal and interest is the power of compounding.

Retire with more than Rs 1 crore by investing only Rs 3000 (Due to the power of compounding).

In this article, I am not going to offer you any investment plan like any promotional content. Rather I am going to share a secret with you. This is a secret of smart investors to become rich with small investments due to compounding power.

I am assuming, you are 20 years old. For the next 40 years make a monthly deposit of Rs 3000. At the age of retirement, you will have more than 1 crore rupees.

In this calculation, the rate of return is considered as 8% compounded annually ( Taking the present PPF interest rate, one of the most secure investment )

If you invest Rs 3000 per month in PPF, you will be crorepati at your retirement.

power of compounding

 

Are you older than 20 and you think this will not work for you. I am sorry you are wrong.

This is an example to show you the power of compounding. It also works for you also. If you are older then maybe you would have the capability of investing more money or with some risk involved investment options like equity and mutual funds.

You may also like to read 11 best investment plan 

A story of a king who lost everything due to the power of compounding

There was a king who was a big chess lover. The king had a habit of challenging wise visitors to a game of chess. To motivate the opponent the king offered any reward that he could name.

One day a traveling sage was challenged by the king. The sage was very good in mathematics. The sage beat the king.

In reward, the sage asked for one rice grain with a condition. The condition was to place the grain in the first chess square and double it on every consequent one. Being a man of his words, the king ordered his granary to fulfill the sage’s demand.

After placing grain in starting squares, the king realized that he was not able to fulfill his promise. Because on the fortieth square the king had to put 1,000,000,000 rice grains.

In the last square, the king would have had to put more than 18,446,744,070,000,000,000 rice grains which is equal to about 210 billion tons and is sufficient to cover whole Indian territory with a one-meter thick layer of rice grains.

The king gave all his wealth to the sage for not fulfilling his promise.

Purpose of This Article

My purpose of writing this article is to show you the power of small investments. Many people have a mind that investment can be made if they will have the thousands or lakhs of rupees. This is one of the biggest mistakes they made in their personal financing.

Don’t wait for a big amount for investing, this would never happen. Start investing with a small amount from today and see the results in the future.

You may also like to read How much LIC agents get Commission 

You can start investing with small amount, in the following investment plans 

Investment OptionMinimum Limit for investment
Mutual Fund SIPRs 500 per month.
Public Provident FundThe minimum limit is Rs 500
National Saving CertificateThe minimum limit is Rs 100
Equity Linked Saving SchemeThe minimum limit is Rs 500
Recurring Deposit with BankThe minimum limit is Rs 1000 per month
Postal Recurring DepositNo minimum limit
Sukanya Samriddhi YojanaMinimum limit Rs 1000
National Pension SchemeThe minimum limit is Rs 500 per month

Conclusion

It’s better to take action with available money than waiting for better options. If you want to create wealth for a secure future, start investing right now. The power of compounding will take your savings to the next level in a couple of years.

Share your thoughts on the power of compounding and starting small investments. Waiting for your comments.

3 thoughts on “Power of Compounding – The Secret to Become Rich”

  1. Pingback: PPF Investment ( Everything You Should Know) - Invest Buddy

  2. Really good article & website. Showing the way to invest specially for small investments & savings.

  3. Pingback: LIC Agent Commission - Invest Buddy

  4. Pingback: 11 Best Investment Plans in India 2017 - Invest Buddy

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