The Power Of Compounding Is Eighth Invention Of Human Kind !

If you look at the World everything is changing so drastically. If people don't act according to the situation they are going to lag behind. In the world of Finance where the Money is the King of all and we are surrounded by it. Everybody needs money for survival and for that we have to learn the principles of money. One of the key factors of every wealthy person is that they clearly understand the principle of money and are guided by their circumstances. 

Why only the money? 

Because to understand the economic value of any country one directly looks into the hands of the monetary value of the country. If i.e low then we can understand that everything we pay for any product is not the actual price we tend to pay more than it is, it's due to inflation in the country. To understand this you have to beat the inflation so that you can become financially independent were all wanted to be. 

Compounding only doesn't help in the case of money but also in all the format of life. When one employee is hired by the HR of the company is due to their skill not by any kind of unemployment issue faced by the government. So when you are more skilled you have more chances to pay a higher salary than those who don't have much skill like you. So it's indirect of compounding effect in once life. This is how life continues.

The Money value :

In the 19th century, people required 40 years to become millionaires. In the 20th century, people required 20 years to become millionaires.

In the 21st century, people required 1 year to become millionaires. 

How far we have come?

Finally entering the money. When you put your money and then generate an interest higher than 10% - 20%. It means first you are beating the inflation and second is that within the 4th to 5th year your money is going to become double the principal amount. With the year you are ahead of poverty you are leaving and your keep growing like a flower. This is how money works for rich people. Its the story of compounding tells you how other people around the world have earned more money than being employed by the company. More money has been made by investing than working for the other. Compounding is the ability of money to grows periodically the gains of the first year is reinvested in the 2nd year and it continues i.e the fundamental property of the money. Every Billionaire of the world has made more through the compounding. They almost have invested a small sum at the beginning but later it keeps growing and growing little by little. At this place where richer are getting richer and the poor are getting poorer. As they increased their liability than an asset. There is thought of poor people that expenditure is only to save money. Poor invest their time and money on TV and where the rich search for other sources of income.

The key Principle of money is :

a) If you need the money for the next year then it should be in cash.

b) The money you need for the next year should be invested and generate interest.

c) One should at least know the timing for investment.

Learn to understand the concept of investing. Where one has to invest. When you keep your money in the bank in FD. You hardly generate more than 7% for a year and in the same year the inflation is increased by 5% and you generate a profit of 2%. Give a little time to think and then invest. Always choose like Mutual Fund or Open Market where you can generate more inter than the banking. Try to keep only the emergency fund in the bank and the rest in the market.

Why Market? It is because you will understand how money works in the open market or in the business. How wealthy people can understand this concept so early and keep away from the poverty line. one simple sentence by wealthy people is that how many years you can survive without working. Let's make it simple. If you have 1 crore and your expenditure is 10 lakh for the month then are wealthy for the 10 months. After the next year you in the poverty line.

 

Why and how investing help you in compounding?

You started to invest from the age of 20 and other people don't invest. When you reached the time of retirement you have very large funds to help you in old age. You don't have to depend on your children for your expenses. Even if they leave you, you can survive on your own. You can gift a car to your family you can have your daughter's marriage you can look for other business etc. There is always an option when you have a good backup. 

If you buy the direct plan by the AMC at least of 1 lakh and the minimum year is 20. After the 20 years, you will have around 28 lakh cash in hands. This happens when you learn and apply the principle of money. A doctor is no doctor without its skill they apply their skill. And this how the worlds work for the doer !.