Power of Compounding

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This article is to explain about power of compounding which is a very powerful concept, Eight wonder of world and reality which many people not aware of. I believe this article will help many people to understand how decent and realistic annualised returns of 40 to 50% will provide financial freedom for rest of the life.

Let’s take an example, Mr. A invested 10 lacs in FD with 8.5% annualised returns and interest will be reinvested in same FD on monthly basis. With this instrument Mr. A’s Capital + returns together will become Rs.15,27,301/- after 5 years and Rs.23,32,647/- after 10 years.

If Mr. A invests on an instrument which gives 48% annualised returns and interest will be reinvested in same instrument on quarterly basis (please note am not even talking about monthly reinvesting of returns). With this instrument Mr. A’s Capital + returns together will become Rs.96,46,293/- after 5 years and Rs.9,30,50,970/- after 10 years.

If Mr. A invests on an instrument which gives 36% annualised returns and interest will be reinvested in same instrument on quarterly basis (please note am not even talking about monthly reinvesting of returns). With this instrument Mr. A’s Capital + returns together will become Rs.56,04,411/- after 5 years and Rs.3,14,09,420/- after 10 years.

This is the power of compounding and please click following link for calculations if you are not convinced.

power-of-compounding

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