The power of compounding

 Now lets come into knowing what is compounding? I don't know of it is a myth that even Einstein said compounding is the eighth wonder in the world. It not about who said it or who recognize it but it really is a wonder. Lets dive into the meaning of compounding. Lets move into previous blog where said about renting the cash which is simply sitting in your hand. Now imagine you already rented the cash(10000$) which was simply sitting in your hand to somebody who is in need at an interest rate of 5% per annually. So at the end of the year one you will be receiving an amount(the rent/interest) of 500$,the person who took money from you repaid all the money after year one including the rent(interest) of 10500 total. Now you have 10500$ of unused cash in your hand. So you decided to rent it(lend) to a needy person now the new person has to pay a rent(interest)of 525$ after completing first year. So this lending and repaying is carried on with the above stated interest. So now you just see how the cash is growing itself .That is the cash is working itself to make other cash. First year 10K $ worked to make 500$ second year 10500$ worked to make 525$ etc. it will go on as time passes and the cash will work until and unless you withdraw from the market.

As per the definition of the compounding it means: Compounding is the process whereby interest is credited to an existing principal amount as well as to interest already paid.[Investopedia]