Millenials Should Utilize Power Of Compounding In Their Favor

Indeed there is. if you remain disciplined and plan suitably. the power of compounding can work wonders for you.

- Kapil Rangwal

Have you heard of any such thing that can make you a millionaire,

Indeed there is. if you remain disciplined and plan suitably. the power of compounding can work wonders for you.

Compounding is a simple yet, a powerful concept. Because compounding is similar to a multiplier effect because it is reinvesting or compounding of income on the initial amount invested and also on the accumulated interest over previous years to grow the amount invested year over year.

In simple terms, the interest that is earned by the initial capital also earns an interest, the value of the investment grows at an exponential rate rather than an arithmetic linear rate. The higher the rate of return, the steeper the curve.

Look at the below example and understand the concept of compounding:

Do you know the 15 X 15 X 15 rule of mutual funds? Well, it simply says that if one does a 15,000 rupees SIP per month for 15 years which earns average 15% compounded annual returns, you are able to accumulate 1 CRORE Rupees. (against your total investment of only 27 lakhs)

Now, read this one. The 15 X 15 X 30 rule of mutual funds? If you do a 15,000 Rs. SIP per month for 30 years (instead of 15 years as earlier), at a 15% compounded annual return, You will be able to accumulate 10 crores (against 1 crore if you invest for 15 years).

This shows that power of compounding can do magic. if you keep in mind that time, and not timing is important for Wealth Creation

Compounding benefits The power of compounding is very beneficial for the people who start early investing. If any person starts investing at an early stage into systematic investment plan (SIP) in equity mutual fund, Public Provident Fund (PPF) or National Pension Scheme (NPS), the power of compounding can help the investor to accumulate a large corpus.