Compounding

Why Compounding has to be taken with a pinch of salt

1) Compounding works wonders

2) It gets better day by day

3) There’s no doubt that money will grow under the power of compounding

4) If the objective of money growth was for the sake of growth then compounding as we know would be the elixir for good life

5) But unfortunately people / investor’s lives do not compound

6) Human life is cyclical beginning in birth and ending in death

7) Hence what is important is how we align our lives to the wealth cycle

8) Clearly mindless patience will not lead to the happiness one seeks

9) Rather having the right money for the right purpose is the philosophy for life cycle

10) Having money for Education at the right age of 20

11) Having money to get married at 28, money to buy a car at 30, money to buy a house or live in one on rent at 28, money to go for holidays every year and money to live without depending on the job for the last 50% of your life is the human life cycle

12) Hence SIP Karo Bhool Jao or Invest for the long term is not the universal investing panacea

13) Rather money management based on Life cycle requirement is more pertinent

14) This entails Asset Allocation and Rebalancing not just according to age and risk but also opportunities that the environment throws up

15) Compounding is the 8th Wonder of the World but providing a perfect experience of compounding is the 8th Wonder of Life