Do
you think that hard work makes you richer than a rickshaw puller who work hard
on the road or a construction worker working the same means that only hard work
is not enough to achieve financial goals.
What
we need more than this is that all these examples are sources of active income
and active income only exists as long as we work.
So, we need to think cleverly and adopt a new way of earning when we do not work which is passive income. Today the rate of inflation continues to increase and the source of income is limited.
What is Compounding's
principal
Compound
interest is nothing but reinvestment of interest at
the same rate investment and interest income also generates an additional
return of compound interest.
This means that interest income also generates additional return on investment.
Now we understand why it is such an important concept in the world of
investment.
Some people are rich because they are not only hard working, they are smarter
than others, they think in different ways and they understand the concept of investment and
compromise.
How to use Compounding principal
Imagine if you have an opportunity to earn a salary, you can earn a limited
amount for the time invested in the company you get at the end of the month
where you work or for your service. The source of income is also limited until
you stop working if you stop working or if you take retirement.
I welcome you where you can unlock the knowledge of finance which helps to get
more things in a short time, it may be that you understand the concept of money
and investment, but the question is how to grow your money, so let us
understand the power of compounding.
Albert Einstein said that his eight wonders of the world and anyone who
understands the power of compounding cannot stop him from becoming rich.
The Law of
Compounding
Start
investing as soon as possible and give time to your investment. Investing
starts with your first earnings, then no matter how small the amount of
investment may be, it can be small but after some time a small amount can be
made into a large amount Can be changed.
The
compounding effect works so the
sooner you start your investment, the more time it will take for your money to
grow.
Do not increase between investments and time is an important factor that plays
an important role in investment. It may be possible that your investment graph
is linear at first but will grow rapidly soon.
Market instruments
for investment
The
investment in Understand Finance of Most people prefer a savings
account, recurring deposit (RD), fixed deposit (FD) or
some government approved scheme or bonds in a secured instrument. Money is not
bad in a single financial instrument and the approach.
But we have few other options available in the market which are regulated by
government approved bodies or regulators like Securities Exchange Board
of India (SEBI), Reserve Bank of India (RBI) and other institutions.
There are some investment options available such as mutual funds, index
funds, bonds, ETFs, investing in stocks, which can provide good returns if
invested smartly.
The average interest rate in secured investments such as a savings account,
recurring deposit (RD), fixed deposit (FD) is between 4-8%, but if you
use index funds or mutual funds, you can get it over
10%. Can get it. The range of 10 to 20% in general depends on the fund and
their portfolio.
Market research
Being an investor, you need to continue the current market trend and sector
analysis and explore the upcoming policy which directly or indirectly affect
the market.
Understanding the
business model
It’s important to know where you want to invest, their product line and scope,
peer competitor and future growth potential.
Don't put all the
eggs in one basket.
Keep your investment portfolio versatile and use strategies to distribute the
investment amounts in a way that covers a significant growing area and has
opportunities in the near future.
Update your knowledge
Keep yourself updated with the current market situation, attend workshops and
seminars and gain new investment and financial knowledge that help improve your
investment strategy.
Conclusion
Compounding is one of the important factors that help to increase your
investment if set smartly. It is always helpful to keep short-term and
long-term goals in mind when you invest.
While it is always recommended to get knowledge and experience before investing,
the best strategy for investing is to start with a small amount when you
understand that the basic concept can increase investment.
