Compound interest is almost like a magic trick. A little bit of discipline, patience and a
small amount of money can wonderfully compound into a sum you could not even have
imagined. The term compound interest means that the interest earned on your investment
is earning you more interest. Which means you’re earning on money that you hadn’t even
invested, but is yours.
If there’s a magical way for an investor to grow his investment or for anyone to reach his or
her financial goal, it’s investing in equity and earning through compound interest.
“I don’t have money” is a delusion
People often are under the misconception that they cannot afford to invest and that they
do not have enough money to invest. Practically, they should be thinking that they do not
have time to delay investing. The earlier one begins investing, the more powerful the
results of compound interest.
Ever feel a pinch when your Netflix subscription deduct around Rs 1000 every month?
You hardly even notice that. Something similar is the case with mutual funds investments.
A SIP investment of as little as Rs 500 or Rs 1000 is enough, to begin with.
Be smart about your money
An investment in fixed deposits or a government bond might earn you around 5% to 8%
interest annually. Now here’s the fact. The stock market has given at least a 12% annual
return, 15 to 16% if you know how to pick the right funds and learn how to take advantage
Now if you had invested the same Rs 1000 every month is a mutual fund, not only would
you have earned at least a 10% rate of interest annually but from the second year
onward, your interest would have started compounding and earning you money.
By the time you’re 50 years old, you’d be worth millions. Does investing Rs 1000 a month
make sense then?
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