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8th Wonder- Power of Compounding

"Compounding interest is the greatest mathematical discovery of all time" - Albert Einstein 

Because compound interest is a really marvellous invention. - Albert Einstein (1879 - 1955) called it the 8th Wonder - It can work for you, or against you. When you invest it works for you. When you borrow it works against you! 

Power of compounding is a simple concept that means the longer and the more you invest, the higher the potential reward on your money, since your money compounds over time. Compounding is a process that allows interest to earn interest upon itself.

Power of compounding works on 3 factors

  • How much you invest?
  • How long you invest?
  • How much return can you get?

The cost of delay is huge….

  Investor A Investor B
  Starts investing at the age 28 years 48 years
  Monthly savings Rs. 5000 Rs. 15000
  Returns (assumed) 12% p.a. 12% p.a.
  Both invest till the age of 58 years 58 years
  Total investment Rs. 18 lacs Rs. 18 lacs
  Wealth accumulated at 58 Rs. 174.74 lacs Rs. 34.50 lacs

Start your investments as early as possible; Delay would result in comparatively lesser accumulation

The longer you invest, makes a difference

Rs. 1000 invested p.m. @
8% p.a till the age of 60
Total Amount Saved Value at the age of 60
Starting Age
25 4,20,000 23,09,175
30 3,60,000 15,00,295
35 3,00,000 9,57,367
40 2,40,000 5,92,947

The more you earn, makes a difference

Rs. 10000 invested p.m. Value after 10 years Value after 25 years
Growth Rate
5% 1,552,823 5,955,097
7% 1,730,848 8,100,717
10% 2,048,450 13,268,334
12% 2,300,387 18,788,466

Wealth can be successfully created if we just follow the three basic principles ...

  • Starting early and saving for long
  • Investing in the right asset class
  • Investing Regularly – big or small

For more details, Contact Wisdom Wealth Consultancy.