Imagine you invest just ₹1 lakh, and after some years, it becomes ₹10 crore. It sounds like a dream, right? Or maybe you think it is fake? But this dream can come true. You only need to understand compounding and give it time.
Compounding means your money grows with time. You don’t need to do anything extra. The real magic starts when your interest also earns more interest. This is called “interest on interest.” It helps your money grow faster. But many people don’t wait. They take out their money early because they see low returns at the start. This is where they lose the chance to earn crores later.
Compounding: The Magic of Interest on Interest
Compounding means your money grows with time. At first, the growth is slow. But later, it becomes fast. Time is very important in compounding. The more time you give, the more money you earn.
If you invest ₹1 lakh, it becomes ₹1.12 lakh in one year. In the second year, it becomes ₹1.254 lakh. In the third year, it becomes ₹1.404 lakh. This happens because you also earn interest on the old interest. This is called the power of compounding.
Start Early, Stay Long
If you start investing at the age of 25 and another person starts at 35, the first person will have more money at 60. Even if the second person invests more money, the one who started early gets better results. This is because compounding needs time.
When you invest for a long time, your money grows faster. For example, ₹1 crore becomes ₹2 crore in 6 years. From ₹2 crore to ₹3 crore, it takes 3.5 years. But from ₹9 crore to ₹10 crore, it takes only 6 months. Big amounts grow faster with compounding.
Don’t Stop in Between
Many people stop investing early because they think it is slow. But the real benefit comes later. Your money grows the most in later years. If you take out money early, you miss this big growth.
So, start investing early. Keep investing every month. Do not stop in between. Be patient. Even a small amount can become a big amount over time through compounding.