Compounding – Tortoise v/s Rabbit

I know the word “Compounding” is known to every person who has done basic schooling, but still I chose to write about it because the older it gets, mightier it gets. Compounding though is a word from Financial vocabulary, it is applicable to all the aspects of life as well. I need not explain the power of compounding to all my well read readers, still to give an example, if one invests Rs.100/- on 1st Jan and earns just 1% per day for 365 days the amount at the end of the year would be Rs.3,778/-. I can make out what you are thinking, its impossible to earn 1% per day for 365 days, ok, take another example, if Mr.X who invests just Rs.1,000/- per month for 50 Years and the Rate of return is just 4% the amount at the end of 50 Years would be 19,15,721/- (Investment of Rs.6,00,000/- and gain of Rs. 13,15,721/-), obviously all the learned readers will immediately ask for inflation adjustment, but consider that I have taken only 4% gain, if we assume the investor will gain at 10% PA and inflation will be 6% average, in that case the effective gain is 4%. Financial wizards will not agree to this calculation, but my point is not to give exact numbers, I just want to reiterate the importance of compounding and use the same concept in other areas.

What it takes to be this consistent for such a long period of time? The answer is obviously “Discipline”. The same discipline will also enable a person to have consistent growth in career which may not be great year on year but as the same compounds after certain reasonably long time, we will call the same a miracle or an overnight success. The only difference is the night would be a bit too long and the person will be too consistent through the long night.

Thus, striving for 15% or 20% growth in business or career is OK, but you should still be fine with just say 7% or 8% growth which is consistent over long period of time. I don’t think it’s difficult to achieve the same.

Thus, it’s always better to be tortoise which is slow but consistent and not like the rabbit which is fast but not consistent. We all know who wins the race.

Comments

  1. UnknownOctober 25, 2020 at 9:54 PM

    Great sir. Need more guidelines for investment.

    ReplyDelete
  2. Vivek MishalOctober 25, 2020 at 9:57 PM

    Avinash your style of writing is very simple and easy to understand. Will be very eager to read more in future. Best wishes. Hare Krishna. Vivek Mishal. Govardhan eco Village

    ReplyDelete
  3. UnknownOctober 25, 2020 at 10:54 PM

    Avinash very well explained! Will try to follow the same.

    ReplyDelete
  4. UnknownOctober 26, 2020 at 7:27 AM

    Great

    ReplyDelete
  5. Chetanram SOctober 26, 2020 at 8:00 PM

    Very Nicely Explained

    ReplyDelete

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