The power of compounding is the greatest wealth multiplier ever exist in this planet.We all know that with the effect of compounding , it can create astonishing great wealth over the time.
Let use an example to illustrate
Mr Tan intend to invest his $10,000 in an investment for 30 years that will generate him a return of 10% p.a .Assuming he reinvested the returns every year.
10,000(1+10%)^30 = $174494.0
So after 30 years,Mr Tan will get $174494.0
Now,Mr Lee intend to invest the same amount of money and for the same duration but the returns he got is 10.1% p.a and assuming he reinvested the returns every year.
10,000 (1+10.1%)^30=$179316.2
Mr Lee reap $4822.2 more than Mr Tan with just a 0.1% difference in returns.
That is the power of compounding , and be caculative when seeking the returns of your investment, and the principal apply to borrowing cost too,the lower the better if we borrow money from banks to pay our house or car loans ,a difference of 0.1% can means alot in the long run.
Let use an example to illustrate
Mr Tan intend to invest his $10,000 in an investment for 30 years that will generate him a return of 10% p.a .Assuming he reinvested the returns every year.
10,000(1+10%)^30 = $174494.0
So after 30 years,Mr Tan will get $174494.0
Now,Mr Lee intend to invest the same amount of money and for the same duration but the returns he got is 10.1% p.a and assuming he reinvested the returns every year.
10,000 (1+10.1%)^30=$179316.2
Mr Lee reap $4822.2 more than Mr Tan with just a 0.1% difference in returns.
That is the power of compounding , and be caculative when seeking the returns of your investment, and the principal apply to borrowing cost too,the lower the better if we borrow money from banks to pay our house or car loans ,a difference of 0.1% can means alot in the long run.
Comments
Post a Comment