Power of Compounding

Power of Compounding-On your Investments

We have heard the word "Power of Compounding" many times in televisions, newspapers, magazines, and in other media, and many times the big names in investing talk about it in their interviews.
Approx all of us learn its formula and mathematical problems during the 4th or 5th standard but when it comes to the application in real life either we all get confused or ignore its practicality. Don't worry today we will again not learn that formula or the definition of compounding but we will understand it in the way that we will not be required to study it anywhere else.
Compounding is a very powerful tool that is applicable to our investment objectives and makes our dreams come true. In simple, we can say that compounding is the interest earned on your interest+principal during the specified period of time. Compounding gives you a multiplier effect on your investment as the interest earned on your investment is again applicable for interest.
Let's understand this from the below instance:
The amount you invest today: 100,000
An amount that you invest monthly: 2000
Number of years you wish to give: 20 years
The annual rate of investment: 7%
After 20 years, your investment of 5.8 lakhs would grow to 14.5 lakhs @ 7% P/A

Benefits of Power of Compounding

Time Value your Reward:
The more time you give to your investment, the more reward you can reap. With time, you could pick up returns, and the yields on these profits could additionally create returns which helps to quickly increase your investments.

Enhance saving habits:
The more you save, the more you can invest and the more you invest, the more you would earn as compounding benefit.
Also, read spending habits can make you rich.

Establish Discipline:
To make a sound corpus and meet your money related objectives on schedule, it is basic to establish discipline. Contributing consistently toward the beginning of your investment journey can guarantee discipline.

Money works when you rest:
You are a human being and need rest at a particular level or age but compounding always puts your money on works, as compounding is giving you compensation as interest and again your advantage is attempting to gain another reward and so on. This is the unending process until your investing tenure ends.

Wealth Accumulation:
compounding has the capability to generate wealth if you nurture your investment like a sapling with the right amount of water, good quality manure, and care then for sure your patience will reward you with unlimited fruits likewise if you invest your money with the company having healthy sales, great margins, innovation capacity with CSR compliance then for sure compounding rewards you with wealth accumulation.

Five key rules for Power of Compounding

• Control your expenses
• Start today
• Be disciplined
• Choose best
• Learn Patience

Also, Read https://bijimoney.blogspot.com/2020/06/time-is-money.html