Friday, October 06, 2006

Power of Compounding

Example to understand the power of compounding...

If you invest Rs. 1 lakh on Oct-2006 and assume that you are getting 20% gain each time for 6 transaction in a year (Ofcourse it is difficult but possible on good market sentiments and selection of good stocks / sectors ).

Continue to re-invest the capital + profit and do this for 5 years till Oct-2011.

At the end of 5 years you will be having a whopping 2,37,37,631.

 

 

Assuming 20% gain for every transaction

 

 

 

1

100000

120000

1

Oct-06

2

120000

144000

 

 

3

144000

172800

 

 

4

172800

207360

 

 

5

207360

248832

 

 

6

248832

298598

 

 

7

298598

358318

2

Oct-07

8

358318

429982

 

 

9

429982

515978

 

 

10

515978

619174

 

 

11

619174

743008

 

 

12

743008

891610

 

 

13

891610

1069932

3

Oct-08

14

1069932

1283918

 

 

15

1283918

1540702

 

 

16

1540702

1848843

 

 

17

1848843

2218611

 

 

18

2218611

2662333

 

 

19

2662333

3194800

4

Oct-09

20

3194800

3833760

 

 

21

3833760

4600512

 

 

22

4600512

5520614

 

 

23

5520614

6624737

 

 

24

6624737

7949685

 

 

25

7949685

9539622

5

Oct-10

26

9539622

11447546

 

 

27

11447546

13737055

 

 

28

13737055

16484466

 

 

29

16484466

19781359

 

 

30

19781359

23737631

5 years end

Oct-11

 

 

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