Compounding interest calculation: Re-investing what you earn on investing is also compounding. In this, interest is also received on the interest along with the principal.
Aspire to be rich? However, the strategy of how to make money from money is not known. That’s where the funding of compounding comes in handy. If you understand the power of compounding properly, no one can stop you from becoming rich. People generally believe that one can be made rich only by investing large amount in the capital market. It’s not like that. Even a small amount can play a big role.
All that is needed is to start your investment with the right strategy. Understand the power of compounding and invest. The sooner the financial planning starts, the more benefit you will get. The investment goal should be long term. It is very important to understand the power of compounding. Let’s know…
What is Compounding
Often you will hear the name of compounding. Discussions of its strength must also be heard. But, still the question will be in the mind that what is compounding after all? Understand directly that what you earn by investing is compounding again. In this, you get interest on the principal as well as its interest. Compounding is the best way to double, triple your investment.
10 years investment
– Monthly SIP: 10 thousand rupees
– Estimated Return: 12% (annually)
– Investment Period: 10 years
– Your total investment: 12 lakh rupees
– Total value of SIP: Rs 23 lakhs
– Advantage: 11 Lakh Rupees
15 years investment
– Monthly SIP: 10 thousand rupees
– Estimated Return: 12% per annum
– Investment Period: 15 years
– Your total investment: 18 lakh rupees
– Total value of SIP: Rs 49.96 lakhs
– Advantage: Rs 31.96 lakhs
20 years of investment
– Monthly SIP: 10 thousand rupees
– Estimated Return: 12% per annum
– Investment Period: 20 years
– Your total investment: 24 lakh rupees
– Total value of SIP: 98.93 Lakhs
– Advantage: Rs 74.93 lakhs
Compounding: Difference on investment of 10 years, 15 years and 20 years
On a 20-year investment, where the SIP value will be around Rs 1 crore and the total return on investment will be Rs 74.93 lakh.
The SIP value will be Rs 49.96.5 lakh on 15 years investment and the total benefit on investment will be Rs 31.96 lakh.
The SIP value will be Rs 23 lakh for 10 years of investment and the total profit on investment will be Rs 11 lakh.
Keep in mind in compounding
Compounding can get better benefits only if you start investing from a young age. At the same time, you should aim for 20 or 25 years instead of 5 or 10 years. The longer the investment is, the greater the benefit of compounding.
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