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Showing posts from November, 2020

The need to understand compounding

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Investment and compounding are the two terms that are always used together. It is believed that the compounding effect on investments helps investors reach their financial goals in a time-bound manner. In fact, the whole relationship between investment, rate of return, and time can be presented in terms of a popular equation i.e.,  Amount = P(1+r/100)^t Here, Amount = the final value of your investment P = the principal amount invested r = the rate of return achieved t = the time for which money was invested If you can memorize this easy equation and apply it to all your investments then in terms of investment knowledge you will be in the top 5% of investors. Most people don't understand the core meaning of this equation and keep on switching from one product to another in search of returns. The equation simply states that if you invest a particular amount and it grows at a rate of return and the successive returns are reinvested then with an increase in time horizon the amount wil

Financial Diet(ing)

Post lockdown weight loss has been the top of the agenda item for a lot of people who blame their exceptional weight gain on the forced stay at home orders that the government issued in March 2020. Gyms, walking, cycling & swimming, everyone seems to catch hold of their favorite activity which will help them shed the extra pounds. But, do you know the biggest factor that decides the speed with which you will shed weight? No, it’s not the amount of exercise that one may do but the amount of diet or calorie intake that the person intakes. The incremental impact on every calorie surrendered is more than the incremental effect of an increase in exercise time. So, if you are pushing yourself too much on that treadmill but eating the same quantity then there is a possibility that you remain stuck at your current weight levels. Today, we are not going to talk about food and exercise. We will talk about something more important, something that may change your life financially. Here we are