Power of Compounding

The power of compounding is one of the most important concepts in economics. It's also one of the most difficult to explain because it goes against everything you've learned about how money works.

But it's so important that we're going to try anyway...

When you invest in a mutual fund, for example, your money is invested in other funds. And those funds are invested in other funds, and so on until your money has been spread out across all kinds of different investments.

That means that if you make 10% on your investment every year (which is pretty good), when you retire you'll have enough money to live comfortably for 20 years—and then some!

But what if you didn't make 10%? Well, then when your time comes around to start investing again, instead of making $1 million (or whatever amount) per year from compounding returns alone (which is probably more than enough for most people), now you'd be able to invest only $25k per year.

Indian context examples are as given below:

🔸With a 50,000 SIP/month, it will take you ~9 years to accumulate the first 1cr

🔸BUT, it will only take you half the time, ~4.5 years to accumulate the next 1cr

🔸AND, only 3 years to accumulate the next 1cr

🔸Start Early, Invest More & let compounding do it's magic.

Compounding is the power of compounding.

It's the idea that, if you're putting money into a savings account or investing in stocks or bonds, you can get more money out of those investments over time. And it also applies to your own personal finances: if you save consistently and invest wisely, you can have more money than you thought possible—and it'll be yours forever!

Compound interest can be called the eighth wonder of the world, and it can be a real game changer when it comes to investing.

Let's say you're investing $1,000 at 10% interest per year, which means your investment will grow to $1,094 by the end of the year. However, if you had invested $1,000 at 20% interest per year instead? Your investment would have grown to $2,004! That's a difference of $1,094—and that means better returns for you over time.

But how does this happen? It all comes down to compounding. When you make an investment and put money into something that earns interest over time, your money grows by a certain amount each year—but it also grows faster than that if there are more years between payments. Because of this growth factor, it compounds over time: the amount of money invested grows faster because more time has passed since the last payment was made!

Compounding is the power of money to grow. 

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The more you have, the more you can do with it.

As you earn more and more money, compounding will help you save up for bigger dreams.

You can use your earnings to buy a house or other big-ticket items.

You can also invest in stocks and bonds, which will let you make even more money in the future!