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 1 st 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 ...