Rachana FinancE

We all have learned about compound interest in our schools. What we did not know then was how it is rightly called the 8th wonder of the world. It is simply a way of earning more interest on the already earned interest. Let’s understand this with an example. Let’s say you invest Rs. 1000 every month for 25 years expecting 10% return p.a. Your total investment amount of Rs. 3 Lacs would have grown to approximately Rs. 13 Lacs. And that, my friend, is the power of compounding!

It’s like your money is earning more money for you, isn’t it? The compounding effect would be more if you stay invested for a longer period. Hence, it is correctly said that “Time is money” and one must start investing as early as possible.

Believe me or not, but investing in the market could cost as low as a pizza! Yes, you read that correctly. On average, we spend between Rs. 500 - 1000 on pizza. There are several quality stocks within this price range to invest in. We can even invest with a minimum of Rs. 500 regularly in stocks or mutual funds. This proves that investing in the stock market doesn’t burn a hole in the pocket. Just imagine how well your wealth and health can improve only by redirecting your pizza money into the market.

Inflation is like a hanging sword over our necks. It is reducing the purchasing power of our money. As per the trading economics, the average rate of inflation between 2012 to 2021 was around 6.01 percent in India. The bad news is that inflation is here to stay and we can’t do much about it. The good news is that the stock markets can help us generate inflation-beating returns of around 10-12% if invested efficiently.

This is possible because India is a developing country. Hence, our industries grow in tandem with our economic growth and have the potential to reflect and generate returns by outperforming the inflation rate.