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| Dreaming with numbers - The incredible power of compounding |
Some figures to work with on a financial calculator:
- If India grows at 6% and inflation is at 5% the nominal growth would be about 11%. Assuming that stocks also grow at 11% the BSE SENSEX should be more then 900,000 by 2050. Appears Impossible!
- A company with annual sales of Rs 100 crores growing at 100% annually should in 10 years report an annual sale of Rs 51,200 crores
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A Systematic Investment plan (S.I.P) of Rs 3000 per month invested for 30 years and compounding at 24% annually will grow to Rs 18.69crores
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The same amount invested at 20% annually will grow to Rs 6.89 crores.
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Now if the return is changed to a conservative 15% the amount would be Rs 2.07 crores.
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The same amount invested in a Bank at 6 % per annum will grow to a paltry Rs 30.13 lacs. You actually destroy wealth by putting money into Bank and post office deposits.
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