The Power of Compounding

Albert Einstein reportedly called compound interest the "eighth wonder of the world." Whether or not he said it, the math is undeniably powerful.

Simple interest: You earn returns only on your principal. Compound interest: You earn returns on your principal plus all accumulated returns.

A Simple Example

Invest ₹1,00,000 at 12% per year:

| Year | Simple Interest | Compound Interest | |---|---|---| | 1 | ₹1,12,000 | ₹1,12,000 | | 5 | ₹1,60,000 | ₹1,76,234 | | 10 | ₹2,20,000 | ₹3,10,585 | | 20 | ₹3,40,000 | ₹9,64,629 |

The gap widens every single year.

The Rule of 72

Divide 72 by your expected annual return to estimate how many years it takes to double your money.

  • At 8% return → money doubles in 9 years
  • At 12% return → money doubles in 6 years
  • At 6% FD → money doubles in 12 years

    • Why Starting Early Matters More Than Amount

    Investing ₹5,000/month from age 25 at 12% gives you ₹3.2 crore by age 55. Starting the same SIP at age 35 gives you only ₹98 lakh — one-third the outcome, even though you invest for only 10 fewer years.

    > Altius Tip: The best time to start was yesterday. The second best time is today. Every month of delay costs compounding power that can never be recovered.