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Power Of Compounding/Make Money/Secret of success
Published: 1 year agoCategory:
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Compounding Investment Magic.

Magic of compounding
The magic of compounding is a powerful financial concept that can help you grow your wealth over time. It is the process of earning interest or returns on your initial investment, and then reinvesting those earnings back into your investment, which then earns even more interest or returns. This creates a snowball effect where your investment grows exponentially over time, even if you do not contribute any additional funds. For example, let's say you invest $10,000 in a mutual fund that has an average annual return of 8%. In the first year, you would earn $800 in interest, bringing your total investment to $10,800. In the second year, you would earn interest on the new total of $10,800, which would be $864. This would bring your total investment to $11,664. Over time, the compounding effect would continue, and your investment would continue to grow at an accelerating rate. The power of compounding can be illustrated by the Rule of 72. The Rule of 72 is a quick way to estimate how long it will take for your investment to double in value. To use the rule, divide 72 by the expected annual return of your investment. For example, if you expect a 10% return on your investment, it will take approximately 7.2 years (72/10) for your investment to double in value. The magic of compounding can work for you over the long term, but it requires patience and discipline. By starting early, contributing regularly, and reinvesting your earnings, you can take advantage of the power of compounding and build wealth over time.