Wondering which is the eighth wonder of the world? No – it’s not a monument, neither any majestic human creation nor a natural scenic beauty. It is the most powerful tool in the universe to grow your money exponentially. It is the POWER OF COMPOUNDING which, according to the great Albert Einstein, is the 8th wonder of the world. Here, the money you invest gets reinvested or, in other words, gets compounded to generate exponential returns over the long term.
Let us explain this with an example.
We see that due to compounding, Rs.1 lakh became Rs.1.25 lakh at the end of the second year.
All you need to do is to stay invested for a longer period of time as it helps you to exponentially grow your investment corpus and generate wealth.
Let us understand this concept of compounding with a simple story of two friends - Shruti and Nisha, both aged 25.
They both had a target of retiring at the age of 50. Shruti started investing at the age of 25, while Nisha started late at the age of 30 and continued the same till both turned 50. They had invested the same amount of Rs 24 lakhs in this process. You might think that the amount of money accumulated will be the same for both, right?
Not really! The corpus built over this period by Shruti was much higher than Nisha.
This is because Shruti started investing 5 years early. Even though her monthly investment amount was lower than Nisha, Shruti was able to garner 1.5 times more corpus than Nisha. One can say that, the delay in investment cost Nisha around Rs 51 lakhs that could have helped her follow her passion during her retirement years.
This is the power of compounding. You stay invested longer, it keeps getting better!
This is simple, right?
But despite being such a powerful tool, not everyone understands and benefits from the Power of Compounding. As Mr. Einstein puts it rightly–“The one who understands it, earns it... the one who doesn’t, pays it.”
Better be the one who earns it and benefits the most from it like Shruti.
So why wait? Start investing today and let the power of compounding take care of your goals!
