After reading the title in your mind the first question comes to your mind is how it is possible? Can it be possible? If possible how?
Also another question that comes in your mind is if it is not possible this is fake, but no this is not a fake this is based on the fact and mathematics. (So without any further ado let’s get started).
In your school period you have learned about the compound interest I think you definitely know about that. So I am going to tell you how compound interest and knowledge on stock marketing can convert money 25 times the initial amount in one day.
If you remember that formula of compound interest is principle(1+rate of interest/100)^year.
Let principle amount = 1 (you may take any amount you want to invest but the calculation remains the same. To properly explain the concept I will take a simple value for example 1).
Rate of interest = 14% (because in the past 15 years CAGR of equity you can see that is between 14% – 15%.
Now let the no. of years be 1
Here you can see the maturity is 1.14.
Further let’s understand this with the example of two people who’re working in the same office, have the same job, earn the same amount of salary but the difference is one is more knowledgeable than the other in this field.
Let’s take two cases: –
CASE-1 (The person has some knowledge about the stock market):-
That was shocking right today you are just investing rupee 1 after 40 years the amount will be 188.8835, let’s assume the amount is 190.
This is called the stock market most people think that the stock market is gambling but it’s not. It is just of lack of knowledge about this.
CASE-2 (The person has no knowledge about the stock market):-
In case 2 the person who does not know about the stock market decides to invest in the bank for safety reasons by creating an FD (fixed deposit).
As you can see the interest rate is 6.20% per year.
Let see the calculation of case 2 of principal amount = 1
Rate of interest = 6%
Year = 1
That’s shocking right ?!
After 40 years we only get an amount of 10.28572 assume that amount is 10.
You can see the difference one person uses a little bit of knowledge and invests in the stock market and another one for additional security or safety he invests in FD in the bank. Now you can see the difference in the amount of money they have after these years accounts to 170, which is in fact a huge number. If This amount will be in lakhs one will get 18.8 lakhs and another will get 1.0 lakhs.
This is not the end in day today’s life the most important thing is that inflation which is the increase in the amount of all things it can be technical things, food items, etc.
Let take an example of a food item, If you buy a food item for 50 rupees, After 10 years or 5 years it will be increased to up to 100 rupees or more. Now the question that has come to our mind is “How much is the average inflation rate for a country ?”
Let’s consider India for instance,
It is shown that in 2018 in India the inflation rate was 4.86% which is a 2.37% increase from 2017. In 2019 let assume India inflation will be 5% by increasing 1% from 2018.
So the rate of interest will be 5%. If your amount is 1 and the rate of interest is 5% after 40 years it will be 7.039989. Let’s assume that the amount is 7.
You now have 1 rupee and the inflation rate is 5% after 40 years it will be 7 rupees. That means the value of your same 1 rupee will be equivalent to 7 rupees after 40 years.
In the above calculation you get 188 rupees in case 1 if we want to find out the current amount? What will the amount?
Let see, the current amount = 188.884/maturity of inflation rate = 26.83009
That means if you invest in the stock market with an amount of 1 rupee then after 40 years it will be 188 rupees and currently you will get 26.83009 rupees which is equivalent to 27 rupees.
It does not look interesting to you is in it? In one day you will get 27 rupees by investing. But what happens to the 2nd one? How much will he get in FD?
If we apply the same formula, In case 2 after 40 years you will get an amount of 10.28572 rupees is equal to 10 rupees. So currently you will get
= 10/maturity of inflation = 1.461042 = 1
By investing in FD you will get 1.461042 is equal to 1 but by investing a good stock market you will get 26.70459 is equal to 27 rupees.
Now let take another example let be case 3.
CASE-3 ( Has some idea about the stock market but the maturity period is 30 years):-
In case 3 the person has an idea about the stock market but the difference is that the maturity period 30 years.
After 30 years he will get an amount 50.95016 is equal to 51.
And the amount of inflation rate after 30 years = 4.321942 and today he will get an amount of 11.78872 is equal to 12 rupees.
Now, let’s compare all of the cases, In case 1 investing in a good stock today you will get 27 rupees, In case 2 investing in bank FD today you will get 1 rupee, and In case 3 investing in the stock market but maturity period is 30 years, today you will get 12 rupees.
In case 1 and case 3 you can clearly see that in only a difference of 10 years the amount increases by double and more than that. If you see the same amount in lakhs one can have 11 lakhs and the other 26 lakhs.
What you get to learn from this is that When you are ordering some food like burger, pizza, etc. of 300 rupees and instead if you are investing the same amount of money in a good stock then in future you will get a chance to eat much bigger pizza or burger. So without wasting money on unnecessary things just invest in the stock market from 18 years of age, after the age of 40 to 50 years old, you will get a good amount of money.
Hey! I am Sarthak Sarangi the CEO of makemoneyonline.org.in. I hope that you are finding our articles quite helpful and informative. Our team has been working day and night to provide you with the best possible and legitimate sources of income online. If you have any queries feel free to contact us.