Compounding

 

Many have talked of compounding. Some have called it 8th wonder.

But compounding to work requires IMMENSE patience, the 1st 10 years may not return much and later it starts jumping. If inflation is steady, then there is true benefit of compounding and the value it generates.

Compounding means that you keep aside money for it to grow. Just like you plant a seed and not expect it to generate fruits the next day, compounding also works that way.

Some stats are placed below to understand Compounding better.

As can be seen above the first 50 lakhs takes 8.5 years, then the next comes faster and quicker.

This working assumes 30000 Rs per month for 20 years or so. Return at 12%.

I have done a lower version taking 10%, @10000 Rs per month. for 20 years. You end up getting nearly 8 crores end of 20th year by putting 1,20,000 per year.