Today I am going to write about a topic which is my favorite one and it is so important that you will read it here again & again. This is because if we hammer something in our brain, it becomes a reality after few days as our mind starts believing in it. Your mind will think that I have read this many times, may be it is true.
A great person has said that, "Compound interest is the eighth wonder of the world. He, who understands it, earns it. Who doesn't understand, pays it". Very powerful sentence this. Read it again to understand. I had heard it right in 2003 with respect to Ppf account in post office. It was like, if we put Rs. 12000/- at the end of year, then it will remain 12000/- only, while if Rs. 1000/- is deposited each month, the amount will be more at end of year because you get quarterly interest and the interest adds on the principal. Your 12000/- might be 12300/- (rough estimate just to give you idea) by year end. Imagine that the compounding time is one month. The amount will grow by year end.
Now, if you just want to get a feel of deja vu, imagine Rs. 1000/- with 1% interest per month(12% annual) compounded monthly for twenty five years. If you calculate and see the amount, you will feel like you are above ordinary people. This is power of compounding.
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