Time is Money
- Jayesh Gala
- Sep 2, 2018
- 2 min read
Ideal aim of investing should be to make money work for you and not you working for it! Money can actually work tirelessly and in abundance through compounding, provided its given ample time!!
Let's understand compounding with a simple story. There was once a poor poet who won the praise of the king with his poetry. The king offered the poet to choose his reward. The poet, who knew his math very well, took a chessboard.
He asked for a single grain of rice to be placed in the first square, double that in the second square, double that in the third and so on until the 64th square. Thinking it a simple offer, the king agreed. So the first square had 1 grain, the 2nd square had 2, the 3rd square had 4, the 4th square had 8. By the 10th square, the number was 512 grains. By the 20th square, it was 524,288. By the 64th square the number was 1,84,46,74,40,73,70,95,51,615. Cant even put the number in words! King didn't have sufficient rice to honor the reward. He lost his whole kingdom and still remained indebted to the poet!
That’s compounding for you. It happens when your first investment earns a return (the second grain in square 2), and this return in turn earns a return and so on over a period of time. In chess story you got 100% returns, rice doubled in each subsequent square. But in real world the quickest way to double your money is to fold it in half and put it back in your pocket :)
But compounding money between 12% - 15% over longer period of time is realistically possible via Equity Mutual Funds.
Compounding is a very simple concept, but given time, it accomplishes extraordinary things. For creating abundant wealth; start immediately, have patience, give money time to grow and do not get swayed by market volatility!
Disclaimer :- All investments are subject to the financial and market risk. Investors should re-assess information provided herein before investing. Mutual Funds are subject to market risk. Past performance may not be sustained in future.
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