KNOWLEDGE CENTRE

The power of compounding
"He, who understands the power of compounding, earns it and he who doesn't pays it". – Albert Einstein

Compound interest is one of the most impressive principles of investing. As complicated as it may sound, it’s really simple mathematics at play.


To illustrate how it works, let’s imagine you’ve started investing with a sum of Rs. 10,000 at 7% p.a. At the end of the year, you will earn an interest of Rs. 700. This is added to your capital creating a new principal amount of Rs. 10,700. In the next year 7% on Rs. 10,700 earns you an interest of Rs. 749.


In other words, compounding interest is simply interest on the principal amount invested as well as on the accumulated returns of the previous periods. Over time, the interest earned becomes more significant as the principal amount grows larger.


In order to benefit from the power of compounding, it’s important to start early. Starting early and staying invested for a longer horizon enables your money to grow over time. If you start investing later then you will need to invest much larger sums of money to reach your goals.

Mutual Fund investments are subject to market risks, please read all scheme related documents carefully.