What Is Compounding?
Creating wealth is no fluke or luck by chance; it is an art and can be achieved only by clever handling of available resources. Discipline and patience are the paths to good wealth management and accumulation. The amount of investment does not matter, but the regularity matters to ensure you will create a corpus that will suffice your financial goals. We tend to ignore the power of compounding which is the key to building up the great corpus. There is a famous saying by the genius Albert Einstein, “Compound Interest is the eighth wonder of the world. He who understands it, earns it. He who doesn’t, pays it.” Power of compounding In simple terms, it means earning interest on interest which leads to growth in your savings and investment. No matter how small the amount, the key is the duration of the investment. In the below table, there is an example of how a yearly investment of INR 10,000 grows year after year at different interest rates. Year Principal ...