Financial Planners

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The Power of Compounding
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Everybody wants to be rich with as little
investment possible!
Wonder how to convert a moderate investment into
a substantial sum over a period of time?
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The Secret Mantra
Power of Compounding
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A simple anecdote
Imagine a snowball as it rolls down the hill,
hardens, keeps adding size picks up pace. By
the time it reaches the bottom of the hill, we
find that it has transformed into a huge, hard
snowball with incredible speed. The maximum
growth happens when its closer to the bottom of
the hill!
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Compounding money works in a similar way!
When you put principal to work, it fetches
interest. When this interest is added to the
principal, from that moment on, the entire sum of
principal and interest earn you the interest.
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There are ample examples around us
Money deposited in PPF account gets accumulated
over the years and exempts interest from taxes.
Its a good example of an account that creates
tax compounding of capital. Similar is the
concept for investments in land, gold, stocks and
so on.
FV PV (1 r)n
Saving more is important
Earlier you start, more you gain
Higher returns are better
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Check the table below to see for yourself!
No. of Years Amount Invested Value of your Investment Growth Multiple
5 years Rs. 3,00,000 Rs. 4,36,710 1.45
10 years Rs. 6,00,000 Rs. 13,15,091 2.192
15 years Rs. 9,00,000 Rs. 30,81, 828 3.42
Assuming a return of 15 p.a.
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Is it always so simple?
Taking many decisions would involve shifting
money continuously from one stock to
another. Chances are that we may end up holding
a stock that fails to click. This slows growth
irreversibly.
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Heres the trick!

• Right idea
• Right time
• Stay invested for long

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Long term investments work on the basis of 2
pillars
Time
Decision Quality
Its a critical variable that ensures our
decision to work for us
Power of compounding requires well researched
decisions
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The icing on the cake
Minimizes the impact of taxes in the long run!
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And this sums it up well !
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Thank You