“If you want to become wealthy by investing in stock markets, you got to be patient. There is no other way. You cannot produce a baby in one month by making nine women pregnant.” – Warren Buffett
We have all learned about Compounding Formula in our school days. The compounded sum(A) is a function of amount invested(P), rate of return (R) and time (N). Unfortunately, too much importance is given to P and R i.e. invested amount and rate of return. But the fact is N i.e. Time makes all the difference. Simple mathematics……but we are obsessed with questions like “How much I get in return ?” “How was the past performance?” etc.
What we need to check instead is are we willing to stay invested amidst all the noise by focusing on our financial goals? Warren Buffett is worth $70 Billion because he has successfully compounded his money for more than 50 years now. Of course stock selection, processes have played a part but time makes helluva difference. A SIP in equity fund of ₹ 1000 p.m. for 35 years assuming returns of 12% can leave you cool 65 lakhs. By investing 4.2 lakhs you end up having almost 15 times in 35 years tax free. If you happen to get 16% return the sum at the end of 35 years will be 2 crores. Wow, that’s fantastic, isn’t it?
You have learned about compounding in school days, it’s time to get benefits of it’s magic. That short cut to weight loss is a long route to getting fatter and sicker in the future. Same with wealth creation. As I always mention, stay invested.
Have a great week ahead.