COMPOUND INTEREST - THE EIGHTH WONDER OF THE WORLD

Read in: 1min, Published On , 23 Mar 2020

COMPOUND INTEREST - THE EIGHTH WONDER OF THE WORLD

March 14 marks the birth anniversary of renowned physicist Albert Einstein. While the legend is celebrated for his contribution to science, believe it or not, he also has a connection to the wonderland of investment. The seven wonders of the world are known globally today. But decades ago, Einstein regarded compound interest as the eighth wonder of the world. After earning and losing money in the Stock Market, he also said, “He who understands it (compound interest), earns it, he who doesn’t, pays it.”
 

Understanding compound interest
 

Compound interest means you not only earn returns on the principal money that you invest but also get to enjoy returns on the interest income that keeps adding to your principal. This process continues until you withdraw your money. In simple terms, with compound interest, you can grow your wealth by just staying put in your investments.
 

What you need to do to benefit from the power of compounding?
 

  • SAVE MORE: To start investing, you ?rst need to develop the habit of saving. This, in turn, calls for monitoring your expenses.
  • START EARLY: The power of compounding needs time to work its magic on your money. You must, thus, start investing as early as you can.
  • BE PATIENT: You can’t expect immediate growth. To savour the bene?ts of compounding, you must think long term and stay calm during market volatility.
  • INVEST REGULARLY: You must make regular investments to accelerate your wealth creation process. Mutual Fund Systematic Investment Plans can help you make periodic investments