{"id":3972,"date":"2016-12-06T10:17:32","date_gmt":"2016-12-06T10:17:32","guid":{"rendered":"http:\/\/s9financialplanners.com\/?p=3972"},"modified":"2025-02-21T10:10:39","modified_gmt":"2025-02-21T10:10:39","slug":"compound-interest-has-a-logic","status":"publish","type":"post","link":"https:\/\/s9financialplanners.com\/blog\/compound-interest-has-a-logic\/","title":{"rendered":"Compound Interest has a logic."},"content":{"rendered":"

Compound Interest is the real deal breaker for Investment!<\/span><\/strong><\/h2>\n

Can we invest once in a quarter? Can we expect the investment to double in 6 months? Is this going to be the safest mode of investment? And the questions keep springing up in our mind until we get the answers in a form of guarantee, isn\u2019t it?<\/em><\/p>\n

Let\u2019s have a reality check!<\/strong><\/p>\n

Have you ever seen a seed growing into a tree until it is not planted and watered regularly?<\/em><\/p>\n

Have you ever seen an athlete claiming that he\/she began to run at a certain speed all of a sudden in one night?<\/em><\/p>\n

\u201cPower of compounding is the eighth wonder of the world,\u201d said Albert Einstein<\/span>.<\/em><\/p>\n

All you have to do to achieve this eighth wonder is to understand two basic principles, first make sure to invest as early as possible and give time to your investment and secondly remain invested and let it grow. Do not retreat your money in between. These two principles make money making simple as a piggy bank to your kid.<\/p>\n

If we can construe the easiest way to break the meaning of Compound Interest, it means nothing but to commit the interest earned at the same rate so that it yields additional payoffs at an equal rate thereafter.<\/p>\n

Why not try it with an example?<\/strong><\/p>\n

Supposing you fetch a 10% return in a year for the investment of \u093010,000\/-. At the end of that year it would grow up to \u093011,000 and the next year after that you will garner a return on \u093011,000\/- and not on an original investment of\u00a0 \u093010,000\/-.
\n\"compound-interest<\/p>\n

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We know the majority of you know this, the real question is what makes this compound interest system so important is this domain of investment? How is it going to help an investor fill in his bags?<\/em><\/p>\n

If we would have to explain this compound interest\u00a0in the language of an investment, we would tell you a story of two friends Manish and Satish. Manish is more of a spender but somehow he manages to invest \u09305,000\/- every year for the first 10 years, later he could not save anything so he stops investing. However, he gets a compound interest rate of 15% on his money for 30 years. Whereas, Satish was busy in his family and career life but happens to realize it is high time he starts investing so from the 11th<\/sup> year he starts investing \u093010,000\/ every year (Manish knows Satish is investing double the amount he had invested) for the next 20 years. Like Manish, he too gets a compound interest rate of 15% every year.<\/p>\n

So basically, Manish had committed \u093050,000\/- and Satish invested \u09301,00,000\/-. When they both decide to check their current position on their respective investment at the end of 30 years, Satish sees that he had made a sizeable \u093016.61 lac whereas Manish made \u093010.24 lac. They both understood that this is the magic of compound interest for Satish. The difference of \u09306.4 lac was because Manish stopped investing after a certain period.<\/p>\n

You portfolio needs two basic logic to yield a compounding impact which are stated below:<\/strong><\/p>\n