“Compound interest is the eighth wonder of the world. He who understands it, earns it… he who doesn’t, pays it.” – Albert Einstein
So, What is Compounding?
Compounding is when your money earns money, and then that new money also earns more money — like a snowball rolling down a hill and growing bigger over time.
It’s the process where your interest earns interest.
Let’s Break it Down with an Example
Suppose you invest ₹10,000 in a fund that gives 10% annual return.
- Year 1: ₹10,000 → ₹11,000
- Year 2: ₹11,000 → ₹12,100
- Year 3: ₹12,100 → ₹13,310
- By Year 10: You’ll have around ₹25,900
- By Year 20: Over ₹67,000
- By Year 30: ₹1.74 lakhs+
You didn’t invest more — the money just kept growing on itself!
Why Is Compounding Magical?
- Time is your best friend: The longer you stay invested, the bigger the results.
- You don’t need to be rich to benefit. Just be consistent and start early.
- Works best when you reinvest your returns (don’t withdraw!).
Where Can You See Compounding in Action?
- SIPs in Mutual Funds
- Fixed Deposits (FDs)
- Recurring Deposits (RDs)
- EPF and PPF accounts
- Dividend reinvestment
Quick Tip: Start Early, Stay Invested
Even a small amount like ₹500/month invested from age 25 to 60 can build a multi-crore retirement fund — thanks to compounding.
It’s not about how much you invest, it’s about how long you let it grow.
