Government Scheme: You must have read about the power of compounding. It is called compounding interest. In simple interest, you get interest only on the principal for a fixed 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 schemes in which compounding interest is available.
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 will be able to add. If you want, you can double and triple your total investment money just by interest with the power of compounding.
Here know about some such schemes which can make you the owner of a huge amount in the long term or say that you can also make you a millionaire. SIP These days Systematic Investment Plan (SIP) is being liked a lot. 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 much risk by investing money directly in shares 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. You can also raise funds worth crores through long term SIP.
PPF
Any Indian citizen can invest in Public Provident Fund. It is considered an old and safe way to save tax and invest. You get the benefit of compounding in long term investment in PPF.
At present, up to 7.1 percent interest is being given on PPF. Investment can be made in PPF 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 add a good amount. This scheme comes under the EEE category, which saves tax on investment, interest and maturity.
EPF-VPF
EPF is also a better investment option for employed people. It is a retirement scheme that secures your old age. You also get the benefit of compound interest in EPF. Also, the interest received on it is more than other savings schemes. Currently, PF is getting interest at the rate of 8.25%. But you can contribute to EPF only up to a certain limit.
But if you want to increase your contribution to take advantage of its interest rates, then you can opt for VPF and increase your contribution to PF. This will give you the benefit of compound interest on a higher amount and you can easily deposit a good amount till you retire and can also avail tax exemption on this amount.
