Key idea
Growth on your growth. Slow and dull for years, then it bends sharply upward, and that bend is where the wealth is.
Compounding means your returns start earning returns of their own. Year one, you earn on your money. Year two, you earn on your money plus last year's gains. The gains stack, and the stack grows the stack.
₹5,000 a month, at ~12% a year
- Yr2
- Yr5
- Yr8
- Yr12
- Yr16
- Yr20
The line barely lifts for years. This is where most people give up, convinced it isn't working. Then it curves upward, because by then the growth is generating serious growth of its own. The last few years add more than the first ten combined.
The two ingredients
Time
the big one
Consistency
every month
Rate
matters least
The counter-intuitive part: time matters more than the amount or the rate. The bend only appears if you leave money in place long enough to reach it. Interrupt it, and you reset the curve to flat. Compounding rewards the patient far more than the clever.
Finished reading?
Marking this complete counts today, and your streak becomes day 1.