photo by orangeacid

Investment experts keep advising us to “invest for the long term,” mainly so that we may benefit from the power of compounding.

Take an individual who decides to invest Rs. 50,000 for 20 years. Assume that he earns a constant return of 8% per year. In the first five years, the Rs. 50,000 invested grows to Rs. 73,466. (see table) This means, he gains Rs. 23,466 in absolute terms in the first five years. [Read more]

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A friend of mine recently applied for a personal loan from a leading bank and was shocked to know that she would be paying almost 50% of the loan amount as interest, spread over a period of 5 years. The purpose of this personal loan was to settle some outstanding credit card dues. Agreed, the rate of interest on a personal loan (16-22% per annum) is lesser than that of a credit card (35-44% per annum). But is a personal loan the only way out? Nope. [Read more]

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