The first line “Compounding is the eighth wonder of this world” is poetic but the second line ” One who understands, reap the benefit and one who doesn’t pay heavily” is simply prophetic.
When someone complimented Warren Buffet that he had started his investments at the age of 11, he famously replied “I was actually 11 years late”. No wonder he was rewarded for understanding the power of compounding so well and today everyone knows him and his continued standing among the top in Forbes list.
Look at the other example- Many years back, when I had just started my career, someone requested me to buy a computer for him. I was working at Nehru Place which was the hub of the IT industry then. This person transferred the amount in my bank account and I was supposed to buy a computer for him. But what I did was use my credit card to buy a computer for him and utilised the money he transferred elsewhere. This was a disaster because I ended up having a liability which was like a mountain at that time. I was not able to pay for a long time and the compounding interest kept piling up and I eventually suffered almost double the amount. I paid the price of not paying attention to the cost of compounding.
So, you have to decide whether you want to get the power of compounding or pay the price of not understanding it.
Manoj Pandey
CFP
