Formula for wealth creation

During one of the programs to launch the book, I was asked by a friend: “Is there a formula for creating wealth?”

After a brief thought, I could think of the most appropriate answer, “Yes, there is, and we were taught it in secondary school. It is popularly known as the compound interest equation.”

The formula is as under:

FV = PV * (1 + r/100) ^ n

Where,

FV = Future value = the wealth you wish to accumulate

PV = Present value = the amount you are investing

r = rate of interest = the rate at which your investment grow, and

n = number of compounding periods = the period over which you earn not only on the investment, but also on the returns generated as the investment returns are reinvested

It is believed that Albert Einstein called this formula “the eighth wonder of the world”. He added: “Those who understand, earn it; those who don’t understand, pay it.”

 

#RidingTheRollerCoaster – 194

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