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Power of compounding
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The power of compounding
The power
compounding explained below:
Consider two
people A & B of same age (25 years), salary. Both started career at same
time at 25 years of age.
Mr.A saves &
invests Rs 12,000 per year. He does like this for first seven years. From
eighth years onwards he could not save money because he gets married and
blessed with baby. he stops putting fresh money into investment. He keeps
the money in investment till his retirement.
Mr. B
lavishly spends money for first seven years. Then he realized and started
saving Rs 12000 from 8th year onwards with great struggle since
he get married like Mr A. He saves continues this till his retirement.
After
retirement both of them take back their money. Can you guess who will have
more money???? See the table
|
|
No. of
Installments |
total
|
returns at the age
of 55 years |
|
Mr A |
12000 x 7 |
84000 |
1121353 |
|
Mr B |
12000 x 24 |
288000 |
1061968 |
|
|
Is it hard to believe?
INCREDIBLE
It is explained in detail
|
Mr A |
Mr B |
|
age |
yearly input |
interest rate |
net value |
age |
yearly input |
interest rate |
net value |
|
25 |
12000 |
10 |
12,000 |
25 |
0 |
10 |
0 |
|
26 |
12000 |
10 |
25,200 |
26 |
0 |
10 |
0 |
|
27 |
12000 |
10 |
39,720 |
27 |
0 |
10 |
0 |
|
28 |
12000 |
10 |
55,692 |
28 |
0 |
10 |
0 |
|
29 |
12000 |
10 |
73,261 |
29 |
0 |
10 |
0 |
|
30 |
12000 |
10 |
92,587 |
30 |
0 |
10 |
0 |
|
31 |
12000 |
10 |
113,846 |
31 |
0 |
10 |
0 |
|
32 |
0 |
10 |
125,231 |
32 |
12000 |
10 |
12,000 |
|
33 |
0 |
10 |
137,754 |
33 |
12000 |
10 |
25,200 |
|
34 |
0 |
10 |
151,529 |
34 |
12000 |
10 |
39,720 |
|
35 |
0 |
10 |
166,682 |
35 |
12000 |
10 |
55,692 |
|
36 |
0 |
10 |
183,350 |
36 |
12000 |
10 |
73,261 |
|
37 |
0 |
10 |
201,685 |
37 |
12000 |
10 |
92,587 |
|
38 |
0 |
10 |
221,854 |
38 |
12000 |
10 |
113,846 |
|
39 |
0 |
10 |
244,039 |
39 |
12000 |
10 |
137,231 |
|
40 |
0 |
10 |
268,443 |
40 |
12000 |
10 |
162,954 |
|
41 |
0 |
10 |
295,287 |
41 |
12000 |
10 |
191,249 |
|
42 |
0 |
10 |
324,816 |
42 |
12000 |
10 |
222,374 |
|
43 |
0 |
10 |
357,298 |
43 |
12000 |
10 |
256,611 |
|
44 |
0 |
10 |
393,027 |
44 |
12000 |
10 |
294,273 |
|
45 |
0 |
10 |
432,330 |
45 |
12000 |
10 |
335,700 |
|
46 |
0 |
10 |
475,563 |
46 |
12000 |
10 |
381,270 |
|
47 |
0 |
10 |
523,120 |
47 |
12000 |
10 |
431,397 |
|
48 |
0 |
10 |
575,431 |
48 |
12000 |
10 |
486,536 |
|
49 |
0 |
10 |
632,975 |
49 |
12000 |
10 |
547,190 |
|
50 |
0 |
10 |
696,272 |
50 |
12000 |
10 |
613,909 |
|
51 |
0 |
10 |
765,899 |
51 |
12000 |
10 |
687,300 |
|
52 |
0 |
10 |
842,489 |
52 |
12000 |
10 |
768,030 |
|
53 |
0 |
10 |
926,738 |
53 |
12000 |
10 |
856,833 |
|
54 |
0 |
10 |
1,019,412 |
54 |
12000 |
10 |
954,516 |
|
55 |
0 |
10 |
1,121,353 |
55 |
12000 |
10 |
1,061,968 |
|
|
84000 |
|
|
|
288000 |
|
|
Can you believe now? Mr A
invested less than Mr B yet, he gets more at 55 years .
This is the beauty of early
start. So start early profit more. This is due to power of compounding.
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