Resumo de Power Of Compounding,investing Strategy And Gold..!!!!!!!

If compound interest is so simple that it is

Really, understanding compound interest
is

very,

very

difficult. The human mind does not

comprehend

such

growth so

easily. We in our physical selves have a

simpler

type of

growth. So we do not comprehend
compounding

of

growth. A

few

old, really old stories might just help.

Let us start with the famous story of
the

Persian

emperor

who was so enchanted with a new ?chess?
game

that he

wanted

to fulfill any wish the inventor of the
game

had.

This

inventor, a mathematician, decided to
ask

for

one

seed

of

grain on the first square of the
chessboard

doubling

the

amounts on each of the following
squares.

The

emperor,

at

first happy about such modesty, was soon
to

discover

that

the total yield of his entire empire
would

not

be

sufficient

to fulfill the ?modest? wish. The amount

needed

on

the

64th

square of the chessboard equals 440
times

the

yield

of

grain

of the entire planet. Just try
converting

into

money

in

any

currency and you will realize the
importance

of

compounding.

A similar analogy is that one penny
invested

at

the

birth of

Jesus Christ at 4% interest would have

bought

one

ball

of

gold equal to the weight of the earth in
the

year

1750.

In

1990, however, it would buy 8,190 such
balls

of

gold.

At 5% interest it would have bought one
ball

of

gold

by

the

year 1466. By 1990, it would buy 2,200

billion

balls

of

gold

equal to the weight of the earth.

The example shows the enormous
difference 1%

makes.

It

also

proves that the continual payment of

interest

and

compound

interest is arithmetically, as well as

practically,

impossible.

Just see what a difference it would have

made if

your

great

grand father had invested in a bank
fixed

deposit

only

Rs.

100 say 150 years back. What it would
have

grown

to?

Here is a dream sheet?.see for yourself.

Imagine

Rs

100

is

invested and it grows at 10% every year.

Column

2 is

what it

will grow to if it was held for the
number

of

years

in

column 1. So if your great grand father

invested

Rs

100,

150

years ago, you would have inherited Rs
16

crore.

Column 1: No of years it is invested
for

Column

2:

What it

would grow to (Rs)

1

110

5

161

10

259

15

418

25

1,

083

50

11,

739

100 1,

378,

061

150 161,

771,784

200 18,990,

527,646

300 261,701,099,618,

845

400 3,606,401,402,752,540,000

500 49,698,419,673,124,400,000,000

So what is the learning from this sheet?

Even a

1%

difference can make a mountain of a

difference,but

the

greatest difference is made by the
number of

years

the

money

remains untouched. That is the key.

For those more mathematically inclined,
I

state

below

the

formula:

Vn = Vo * (1+r)^n

?n? in the compounding formula is the
number

of

times

the

amount is compounded. But for practical

purposes

if

you

take

that as the time for which you stay
invested

in

an

instrument, you would not be too wrong

either.

What it means is that:

The amount of money that you require
(Vn)

is

equal

to

the

amount invested today (Vo) multiplied
by

[1+

interest

rate

(r)] raised to the number of times the

amount is

compounded

(n).

In this formula you as a client can
control

how

much

money

you want at the end of the waiting
period

(Vn),

how

long

the

money can be invested (n), and how much

money

you

can

invest

today Vo.

Instead of worrying about ?r?, just
start

investing.

That is

the key.

Try it yourself: Use this calculator to

understand

the

astounding power of compounding

Takeaways:

Start investing early

Do not touch the amount for a long time

Do not keep jumping from one investment

instrument

to

another

Let the power of compounding work for
you.

It

would

have

worked for your grand dad, dad and you.
If

they

knew

it,

great. If they did not, you can start
the

line.

At

least

your grandchild will praise you for it.

To see what it would have become over
500

years

is

fantasy.

What it could have become over 150 is
Ratan

Tata.

When you read about ?the rich get
richer,

and

the

poor

get

poorer?, it is not about socialism. It
is

about

compounding.

Enter gold at support levels of USD 540/oz

2006-06-22 15:36

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Gold has fallen nearly by 11% in two months.
The

metal

has

been sitting on the bull for the past three

years

with

it

beefing up by 68.24%. Three years back gold
had

been

trading

around USD 352.45 per oz and now it is
around

USD

593.15

per

oz.

Gold which has been seeing a technical

correction

has

lost

around 6% in one month, but has been
recovering

its

losses

for the past three days. Traders attributed

gold's

recent

turnaround to oil climbing back above $70 a

barrel,

combined

with dollar losing its strength against the

euro.

Expectations of an interest rate hike by 50-

basis

point

in

the FOMC meet on June 28 have triggered the
sell

off

in

gold.

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