Investment Tips: If you want to understand the Power of Compounding then invest money in these 3 schemes...
You must have read about the Power of Compounding. It is called Compounding Interest. In simple interest, you get interest only on the principal amount for a certain period. But in compound interest i.e. compounding interest, you get interest on the principal as well as its interest. In such a situation, your money grows rapidly. Nowadays there are many such schemes in which compounding interest is given.
But if you want to understand the Power of Compounding, then invest in those schemes in which your contribution lasts for a long time. The longer you invest, the more money you can add. If you want, with the power of compounding, you can make double and triple the money of your total investment only from interest. Here know about some such schemes which can make you the owner of a huge amount in the long term or say that it can also make you a millionaire.
SIP
Systematic Investment Plan (SIP) is being liked a lot these days. Investment in mutual funds is done through SIP and you can make this investment in installments. The longer you invest in SIP, the better you will be able to take advantage of compounding. Investors who do not want to take more risk by investing money directly in stocks in the market can invest in SIP with less risk. Being market-linked, it does not give guaranteed returns, but usually, the estimated annual return on SIP is considered to be up to 12 percent. Sometimes it can also be up to 14 and 15 percent. The longer the SIP, the bigger the profit. Through long-term SIP, you can also collect funds worth crores.
PPF
Any Indian citizen can invest in the Public Provident Fund. It is considered an old and safe means of saving and investing tax. You get the benefit of compounding in long-term investment in PPF. At present, PPF is getting up to 7.1 percent interest. Investment in PPF can be done for up to 15 years. But you can continue your investment for the coming years by increasing it in blocks of 5-5 years and can add a good amount. This scheme comes under the EEE category, due to which there is tax saving in investment, interest, and maturity.
EPF-VPF
EPF is also a better investment option for employed people. This is a retirement scheme that secures your old age. You also get the benefit of compounding interest in EPF. Also, the interest received on this is more than other savings schemes. At present, PF is getting interest at the rate of 8.25%. But in EPF, you can contribute only up to a certain limit.
But if you want to increase your contribution to take advantage of its interest rates, then you can choose the option of VPF and increase your contribution to PF. This will give you the benefit of compounding interest on a larger amount and you can easily accumulate a good amount by the time of your retirement, and you can also avail the benefit of tax exemption on this amount.
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