Power of Compounded Lifestyle
1) Many times we belittle the power of “a few percentage points difference” between Returns of FD and an MF
2) For instance a 3% higher Returns in a Mutual Fund than FD may not appear substantial enough to move you to take immediate action. You may expect to see a higher difference
3) This is Because the number “3” is does not appear large enough from a one year Perspective. After all Rs 100 will become either 105 at 5%or 108 at 8%. Yes there is a difference but perhaps this picture does not show you the Power of Compounding
4) But that is where understanding of Power of Compounding is needed
5) Let me put the same 3% effect in other words
6) What if I say that by investing money at 3% higher Returns it can help you to enhance your lifestyle by 25% after 15 years
7) An enhanced 25% lifestyle is equal to having a full time servant or not; going on an annual holiday or not; having a car and chauffeur or not
8) If the investing period is increased from 15 to 20 years then the lifestyle improvement index increases even more
9) Therefore before one tries to play down a 7% to 8% Returns, think twice
10) It can mean the world to a Retiree because at 60 a full time servant, a driver, an annual holiday makes a massive difference
