Why Is Compounding So Famous?

Introduction

Guys, when you and I or a retail investor like me think of rupees 1cr, it feels very strange to think about it. We often think that it is impossible for us to collect 1cr or few lakhs, no matter how much we save or invest, but today I will tell you about a secret of money, which if we use it properly, little Save and invest it in the right place for a long time. 

Again, making not only 1cr, but also many crores of rupees is not a very difficult task, I welcomed you to our blog we may have heard the word compounding many times but we can never fully understand what its Meaning, and no one can explain it in simple words, so today I will explain it to you in very simple words. Now, simple interest, compound interest,  and how it can make a small amount for a very large amount.

Example

Let us understand compounding in very simple terms. Consider that A and B are two friends. Both had very little money. After spending a lot of money, he saved a little and thought that he should invest the money somewhere so that he could get some returns. 

A was invested in bank A from where he got simple interest and B invested in bank B. He got compound interest. Both friends invested investment 100 and both banks said that they would get 10% return annually, now let's see how this investment will be in the coming years.

If I talk about the first year, then, first In the year, both of them invested ₹ 100, now after the first year, Bank A gave a 10% return on ₹ 100. So got a return of 10, so after a year, his money increased to the 110, similarly, if I talk about B, then B invested in Bank B, which also gave 10% return, but on compound interest. 

After the first year, B also gets the first 10 returns on his invested value. Now you have to be thin. Raja. After the first year, they both get the same return, hence, there is no difference between simple interest and compound interest. , But this is not true as there will be a huge difference in their returns in the coming times. 

Talking about the second year, if I talk about the second year, Bank A will give the same return in the second year. If I explain to you in simple terms, his invested value was ₹ 100, so in the second year, he will get a 10% return on will 100, then he will get a return of getting 10again. So his investment will increase and will be 120, and now I will talk about B., not at 100, but it will return at 110. 

This is the basic difference we can see in compounding. Therefore, the return to B in the second year will be of But 11, but not the return of a 10 Therefore, the small difference you can understand here is that the return received in the second year was still at that 100 but the return is That. 

Not found at but 100, but got it at using 110, to continue this process, when I arrive in the fifth year, in the fifth year, the returns that I get are the same as in the first year, In the 100 he has invested, he gets a return of 10%, so even in the fifth year, he gets a return of 10 on his invested value, so his total money rises and But becomes 150, now we are compounding. 

Let's talk about interest, investing about B, so investing B as I told you, every year the interest that is not on But 100, but on the previous year is if I talk about the fifth year, So the return he gets in the fifth year, he gets at ₹. 146 and not 100, 

the fifth year, the compound interest he gets will be 15, and not 10, so his investment value will increase to And 161 and A increases to 150, so note that Here the difference in their two investments is of different 11, sound 11 should sound like a very small amount, but I will tell you a small concept in percentage, the return A got in the fifth year was return 10, B which in the fifth year. 

Found, that's 15, so B's return is 50% higher than So 10, so in just five years, the returns he got were over 50% for those of you who are still confused about this concept. Let me explain again in very simple terms what happens in simple interest, you get a return on the money invested, but in compound interest, the money you invest and after the first year, the return you will get But you will get a return in the next year. 

which means that the money increases manifold and becomes a very large amount. In the coming few years, let us talk about investment, if, for the next ten years, invest only ₹ 10,000 every month, it will give me a compounded return of 12%, what did you invest? You invested 12 lakhs but how much will the investment value increase? 

This value will be further increased to 23 lakhs, so, you know how much your profit was, your profit was more than 11 lakhs friends, you invested 12 lakhs and your profit was 11 lakhs. This is the power of compounding, in this way, with little savings we can make a lot of money. What I have just talked about, I have only talked about ten years but if today you are around 25 years of age. 

You do not retire, you can save a little of  10,000 every month, so I will tell you, that by saving that 10,000 every month and investing it in an asset like this, for the next thirty years, then How much your money will increase, your money will reach such an amount, which we only dream about: Maybe in crores now let me tell you what the real value will be friends,

This is that magic figure, for the next thirty years your investment of 10,000 will increase to around 3.5cr or maybe more than I told you in the beginning that our dream is to collect 1cr rupees, but if we only invest one 10,000 years For the next 30 years. 

then the investment value would be only 36 lakhs, which was the actual value, but due to the returns, the value would exceed 3.5 crores, meaning that you had invested only 36 lakhs, but, just your profit 3.2. Crore, therefore, the value increases to more than 3.5 crores. 

This is the secret of wealth. This is a small concept, if used at the right time and in the right way, your small savings can come in the coming time, turn into crores. Now, friends, you have understood compounding, but along with compounding, there was a small and very powerful concept and that is the investment horizon. 

By the time you make an investment, you should already know that if you Compounding horizons over time, a single ger time horizon then compounding is much more powerful as the value of compounding increases as the time period of compounding increases. So, take a pledge with me that wherever you invest from today, you will first see how much return you will get from it. 

Get simple interest or compound interest because, friends, simple interest gives you returns on the money you earn. But with compound interest, not only do you get a return on your earned money, but in the long run, you get a return on your earned money, and get a return on it too, if, after reading this blog.

you feel that you should start investing and in the coming time you want to make a huge amount, then you should keep in mind only three things, first of all, be patient with a long term investment because if you do not invest for a long time If you do, your returns will never be good. 

You should see what kind of return you are getting, whether you are getting an ordinary return or compounded return because Compound Aid Return is very powerful. Third, you should see what kind of property you want to invest in, for which You have to do a little research because there is a lot of information in the market. If you use that information properly for your benefit, then you can get a huge amount of money in the future.

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