Intensity of Compounding is known as the eighth miracle of the world, in this subject today we will discuss what is Power of Compounding, and what we can profit by utilising it, and it Why is known as the eighth marvel,
Regarding Power of Compounding –
Albert Einstein has said – Compound interest is the eighth wonder of this world, who understands it, finds it (EARN), and who does not understand it, pays it (PAY),
What is POWER OF COMPOUNDING?
By POWER OF COMPOUNDING we mean,
When we use COMPOUND INTEREST to make a lot of profit on our money,
For Power of Compounding, we have to keep returning the benefits of Compound interest on our funds for a long time. And in this way we have to keep investing according to our financial goals and predetermined time till we achieve “huge target of wealth” according to our Financial Goals.
Example – 10 thousand to 10 crores
Yes, by using Power of Compounding, an investment of 10 thousand rupees can be made of 10 crores of money in 30 years, Isn’t it astounding – how about we perceive how 10 thousand to 10 crores can be made?
For this, you have to invest 10 thousand rupees at the rate of 36% annual compound interest, And the compound interest received every year is to be invested continuously for 30 years, including the previous total capital, Furthermore, in this way you will see that 10 thousand rupees becomes 10 crores in 30 years by exploiting 36% self multiplying dividends,
In this example,
If there was a simple interest, we would have got total profit = 36% of 10000 thousand every year = Rs 3600. Also, for a very long time 3600, consistently implies absolute – 3600 X 30 = 108000 and essential sum is 10 thousand, In this manner the aggregate sum will be – 1 lakh 18 thousand, So companions, this is the distinction between POWER OF COMPOUNDING and Simple Interest speculation,
Despite everything being the same, how big is the difference, Time likewise 30 years, and AMOUNT of INVESTMENT additionally 10 thousand, But the difference was, instead of using SIMPLE INTEREST, using COMPOUND INTEREST, 10 thousand rupees, time was 30 years and 36% according to the annual simple interest – 1 lakh 18 thousand And 10 thousand rupees, time 30 years and 36% of the annual COMPOUND INTEREST – 10 crores,
Now think to yourself,
What kind of profit would you like to earn on your investment, simple interest or compound interest?
I think your answer will be – COMPOUND INTEREST ONLY AND ONLY
Magic of Compounding – The story of three friends becoming millionaires!
Use of POWER OF COMPOUNDING,
You can use Power of Compounding to complete any of your LONG TERM GOALs, and create as many WEALTHs as you want, You have to think how much money you need in LONG TERM, And to get that money, you have to find out, how much% compound interest you have to get every year, And once you know the RATE of COMPOUND INTEREST required to complete your financial goal, then whatever amount of AMOUNT you have today, for a sufficient period of time at the rate of that compound interest, is a regular and disciplined investment. Have to do And thus, you will definitely- By using POWER OF COMPOUNDING, you can make as much money as you want (WEALTH CREATION),
POWER OF COMPOUNDING – the world’s greatest wonder,
Robert Kiyosaki has written his book, Rich Dad Poor Dad referring to the Power of Compounding-
“Of the apparent multitude of marvels of the world, perhaps the best miracle is” The Power of Compounding ” And further mentioning a real incident is told-America’s purchase of Manhattan Iceland is considered one of the world’s greatest deals, because the deal was sold to the entire city of (New York) for just $ 24, Yes, this world’s largest and richest city was sold in just 24 dollars for just 24 dollars, Many people will consider it a joke, and many people will also wonder how such a big city of this world was sold for just $ 24, But, what Robert Kiyosaki has said by associating this incident with “Power of compounding”, you will probably be surprised by that, He further explained that,
The deal was signed around the end of the seventeenth century, ie 1695, And, in today’s time, it would be foolish to think of that city on one side and its $ 24 deals on the other side, But you should note that – if that $ 24 would have been invested at the rate of only 8% compound interest, then the price of that $ 24 in 300 years is – 2,55,468,811,638.06 Maybe you should take some time to read this number, But note that this is only 8% of compound interest, And if you talk about a bit more interest rate then this number becomes very large, so large that the city of New York can be repurchased today using the same $ 24 and Power of compounding, And even then there will be so much money left that another city of America, Los Vegas can also be bought, So this is the special thing – power of compounding.
I am sure most of you must have read about compound interest or compound interest in school days.
In simple words, getting interest on interest is compound interest.
Founder & CEO| Fox Investor & A.V.A. Taxway Associates- Corporate & Tax Law Firm
Viibhor Agarwal is a Business & Brand Consultant as well as he is a Financial Expert his area of specialization is to guide Entrepreneur, Start-up’s and SME’s to build the brand value of business financially & legally. He has 8 year extensive experience in this sector