Do you think that
hard work makes you richer than a rickshaw puller who work hard on the road or a
construction worker working the same means that only hard work is not enough to
achieve life goals What we need more than this is that all these examples are
sources of active income and active income only exists as long as we work.
So, we need to
think cleverly and adopt a new way of earning when we do not work which is
passive income. Today the rate of inflation continues to increase and the source
of income is limited.
Compounding's
principal
Compound interest
is nothing but reinvestment of interest at the same rate investment and
interest income also generates an additional return of compound interest.
This means that
interest income also generates additional return on investment. Now we
understand why it is such an important concept in the world of investment.
Some people are
rich because they are not only hard working, they are smarter than others, they
think in different ways and they understand the concept of investment and
compromise.
Imagine if you have
an opportunity to earn a salary, you can earn a limited amount for the time
invested in the company you get at the end of the month where you work or for
your service. The source of income is also limited until you stop working if
you stop working or if you take retirement.
I welcome you where
you can unlock the knowledge of finance which helps to get more things in a
short time, it may be that you understand the concept of money and investment,
but the question is how to grow your money, so let us understand the power of
compounding.
Albert Einstein
said that his eight wonders of the world and anyone who understands the power
of compounding cannot stop him from becoming rich.
The Law of
Compounding
Start investing as
soon as possible and give time to your investment. Investing starts with your
first earnings, then no matter how small the amount of investment may be, it
can be small but after some time a small amount can be made into a large amount
Can be changed. The compounding effect works so the sooner you start your
investment, the more time it will take for your money to grow.
Do not increase
between investments and time is an important factor that plays an important
role in investment. It may be possible that your investment graph is linear at
first but will grow rapidly soon.
Market instruments
for investment
The investment in
Understand Finance of Most people prefer a savings account, recurring deposit
(RD), fixed deposit (FD) or some government approved scheme or bonds in a
secured instrument. Money is not bad in a single financial instrument and the
approach.
But we have few
other options available in the market which are regulated by government
approved bodies or regulators like Securities Exchange Board of India (SEBI),
Reserve Bank of India (RBI) and other institutions.
There are some
investment options available such as mutual funds, index funds, bonds, ETFs,
investing in stocks, which can provide good returns if invested smartly.
The average
interest rate in secured investments such as a savings account, recurring
deposit (RD), fixed deposit (FD) is between 4-8%, but if you use index funds or mutual funds, you can get it over 10%. Can get it. The range of 10 to 20% in
general depends on the fund and their portfolio.
How to use
compounding power
Market research
Being an investor,
you need to continue the current market trend and sector analysis and explore
the upcoming policy which directly or indirectly affect the market.
Understanding the
business model
It’s important to
know where you want to invest, their product line and scope, peer competitor
and future growth potential.
Don't put all the
eggs in one basket.
Keep your
investment portfolio versatile and use strategies to distribute the investment
amounts in a way that covers a significant growing area and has opportunities
in the near future.
Update your knowledge
Keep yourself
updated with the current market situation, attend workshops and seminars and
gain new investment and financial knowledge that help improve your investment
strategy.
Conclusion
Compounding is one
of the important factors that help to increase your investment if set smartly.
It is always helpful to keep short-term and long-term goals in mind when you
invest.
While it is always
recommended to get knowledge and experience before investing, the best strategy
for investing is to start with a small amount when you understand that the
basic concept can increase investment.
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