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Must Know by Investor: Theory of componding

Tuesday, March 10, 2009 | Labels: , , | |

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As exchange of things were come in world. There was so amazing things introduced to human. Exchange intially started in form of psychical stuff were change for various requirement. Slowly this exchange convert from stuff to money slowly. Human being become part of raw economy. At first there was barter.Then man thought of inventing a common currency for trade. Next, came the Egyptian gave us papyrus rolls and what we got is paper money.Then bankers came in vogue who promised not just to keep your money safety but also pay something more for your trust. And so the concept of simple interest was born. Then some smart-wit who invested some money came with phenomenal thought. He (or she, I don't know) argued that why is it that principal amount will earn money and not the interest part of it. After all, money whether in the form of principal or interest is money only.....

So that was the prologues in brief . Now to the nitty-gritty of it. In school, your mathematics teacher must have taught you a simple formula-

A=P{1+(R/100)}^N where,

A= amount in Rs.
P= Principal invested in Rs.
P= Rate of interest (%)
N=Numbers of years

This simple equation is key of become rich.
I like to explain you this equation tell us that small amount of money can also become huge amount over time, Rather than huge amount in small time.

If you are like this and any suggestion to our reader, feel free to write your ideas in comment.

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