Investment |
September 27, 2018How Power of Compounding Helps in Creation of Wealth?
The first and foremost reason why people invest is to grow their wealth. If you want to make your money grow, you should also consider making mutual funds investment. Though this comes with market risk, it often brings you the maximum returns on your investment.
You can further increase your returns and create a greater wealth with the power of compounding.
What is the Power of Compounding?
Compounding basically refers to the interest you earn on interest. This earning on the interest you earn leads to substantial growth over time.
Using the power of compounding you can easily create a lot of wealth even by investing a small amount. The trick is to start investing early and for a long-term. You need to make disciplined mutual funds investment to enjoy the benefits of compounding.
When you invest in mutual funds, you will make gains when the value of each investment unit goes up. Investing for long-term will help you grow your investment more. That’s because your invested money starts to create returns. Then, you’ll make gains on your principal amount as well as your returns.
Here’s how your investment of one lakh rupees every year can grow in twenty years with the power of compounding at different return on investment (ROI):
The best way to enjoy the benefit of compounding is to:
- Start investing early, right from the time you start earning
- Make disciplined investments. Be regular
- Be patient and invest for long-term
- Keep a check on where you spend your money
These tips can help you manage your finances well and get rich over time.
Final Thoughts
Compounding is a great technique to make your money work harder for you. You can plan to create funds for many of your financial goals in life, including retirement. But this can happen only if you make smart investments at the right time.
If you want to learn more about mutual funds investment, you can always reach out to financial experts.