All of us are working hard and earning money and then we save that money to reap some lump amount after several years. But wouldn’t it be nice if our money can work for us and earn more money? This might sound insane for some people but for people who have invested in mutual funds at some point in their life, know how true and possible this is.
Now, what is it behind mutual fund investments that will make this insane thing possible? The main secret behind mutual funds is the “power of compounding”. What is compounding? This is the gateway that will make your money make more money. Einstein rightly said, “Compound interest is the eighth wonder of the world. He who understands it earns it and he who doesn’t pays it.” Let’s see two examples to understand this better.
Consider your savings as an apple. And now the seeds of the apple as the interest of that saving. Now if you just keep throwing away the seeds and using just the apple, you will be left with nothing soon. Rather, if you plant the seed and allow it to grow into a tree (this might take a while obviously!), then you not only can enjoy your share of apples but will have lots of more apples to enjoy too. If you can grow few more trees from those apples, you would soon be able to have an apple farm! Now, this is called compounding, where you keep reinvesting the interest that you earn along with your principle savings and thus every time your principal amount increases and in turn, the interest for that amount increases and this goes on and on in a cycle.
Another interesting example for you. If we are given a choice between a bag of hot cash of 1 crore rupees or One rupee that doubled every day for 30 days, which one would we take?
Most of us would readily jump for the bag of cash. But if we take our time and calculate, it will be a real surprise to know that on day 30, the one rupee that doubled for 30 days would be worth more than 50 crore rupees!! So, this is another simple yet classic example to show the power of compounding that is actually happening in mutual funds.
However, your savings and investments purely depend upon your needs. So, it is always best to get the help of an expert in the field like a mutual fund agent before you start investing. A mutual fund agent will not only have the thorough knowledge of the fund but can sit with you to analyse your financial potential and suggest the right type of fund to get the maximum returns within the desired time frame. Get in touch with your mutual fund agent today and enjoy the eighth wonder of the world right from where you are seated through the power of compounding!