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An Investor’s Perspective: The Story of Rice and Chessboard

“Doesn’t matter where you start, it’s how far you go and whether you withdraw anything along the way”

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rice and chessboard
The total number of rice grains needed to fill the chessboard would be 18,446,744,073,709,551,615. Shutterstock

In life, you need to have both knowledge and experience to reap the most significant dividends. Without one, the other will always yield fewer results. Take the classic story of rice and chessboard, for instance. The story, where a sage after serving a king well asked the king to fill a chessboard by putting rice grains in each square. The count must start with one grain but should double the number in the next square.

‘How much rice could it take?’ thought the king and ordered the sage’s wish fulfilled. He couldn’t have been more wrong.

How Much Rice Will Fill the Chessboard?

The total number of rice grains needed to fill the chessboard would be 18,446,744,073,709,551,615. That is more than 18 quintillion rice grains with an approximate weight of 210 billion tonnes.

India currently produces an approximate 100 million tonnes of rice each year. At this rate of production, it will take the country more than 2,000 years to grow enough rice to pay the sage entirely.

Crux of the story?

“Doesn’t matter where you start, it’s how far you go and whether you withdraw anything along the way.”

investor's perspective, rice and chessboard
For instance, when you invest in a mutual fund, you earn interest on the principal amount. Furthermore, you reinvest your earnings or earned interest to receive additional units. Pixabay

What’s Compounding & How Does it Work?

Compounding works pretty much the same as the chessboard rice count. And there’s much to learn from this story if you wish to compound your wealth. In today’s day and age, who wouldn’t like to see their money grow?

In case of investments, compounding implies earning an “interest on interest.” In other words, compounding is similar to a multiplier effect because the interest earned on the initial capital also earns interest. As a result, the value of your investment grows exponentially rather than linearly.

The benefits of compounding are prominent in the long-term investment period. For instance, when you invest in a mutual fund, you earn interest on the principal amount. Furthermore, you reinvest your earnings or earned interest to receive additional units.

This way, you can earn a return on both dividends and the principal. This is essentially how compounding works: the principal amount is combined with the re-invested income, and your investment grows at an increased rate.

For example, an investment of Rs. 1,000 every year will grow up to Rs. 1,84,166 at an annual interest rate of 8 percent in 10 years. At the same rate of interest, you may earn up to Rs. 5,92,947 in 20 years. As you can see, when you invest for an extended period in a market-linked instrument such as a mutual fund, SIP or ULIP, you can easily maximize your earnings, courtesy compounding.

investor's perspective, rice and chessboard
ULIPs or Unit Linked Investment Plans offers you the combined benefits of investments and insurance under as a single plan. Pixabay

How Does ULIPs Yield Compounded Return?

ULIPs or Unit Linked Investment Plans offers you the combined benefits of investments and insurance under as a single plan. If you have long-term goals such as buying a house, a new car or sending your child abroad for higher education, ULIPs can help you maximize your savings through compounding, and you get considerably high returns on your capital.

This stands true even when you want to exit the ULIP after the initial lock-in period of five years, in comparison to retaining your money in a savings account or an FD, or not having invested the amount at all.

While a portion of your investment is used to provide life cover, the remaining amount is invested in a variety of equity and debt instruments as per your risk appetite and life goal. Essentially, you can reap the most benefits from the compounding effect by keeping your ULIP going for a longer time horizon.

You have the flexibility to switch between equity and debt fund options under ULIPS, which allows you to secure your investments against market volatilities. The equity investments under a ULIP are made at the prevailing Net Asset Value of the fund (NAV) of the funds. The NAV is the “price’ of each fund unit, which is calculated by dividing the sum of all investments made under the fund by the number of units issued.

investor's perspective, rice and chessboard
The NAV is the “price’ of each fund unit, which is calculated by dividing the sum of all investments made under the fund by the number of units issued. Pixabay

ALSO READ: Is Budget 2019-20 a Hope for India’s Development?

With ULIPs, Compound Your Savings and Happiness Easily

Your wealth can easily grow into a substantial fund amount courtesy the benefits offered by compounding. However, you need to take advantage of the market-linked investments through ULIPs to achieve that.

While ULIP plans from reputable insurers such as Max Life Insurance help you maximize your investments through long-term equity market investments, they also help secure yourself and your loved ones against life’s contingencies with high ULIP returns and life cover.

Remember, if money is like the grain of rice and investment market is the chessboard, your approach and experience only limit you. Play smart and hold the innings together to achieve long term returns.

Next Story

Learn to Invest in Real Stock Markets Through Beginners Trading Certification Training

As investing in stock is a very hectic job, learn to do it easily

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Stock markets
Investing in stock markets could be one of the most lucrative decisions for anyone. Pixabay

Investing in stocks could be one of the most lucrative decisions for anyone. Although the risk involved in stocks is high, no other investment performs better in the long term. While a lot of people try to time the markets and track history, the best way for newbies is to start with professional beginners trading certification training. The training allows you to develop, practice, and improve your investing skills through a combination of theory and practice. It gives you an introduction of the stock markets and ensures that you improve your trade ideas and become confident enough to make the most of your investments. The training is delivered using state-of-the-art online tutorials and interactive exercises to boost your learning experience.

Let’s find out what the training packs in for you!

Stock markets
At every point, there are people who keep on predicting whether the stock markets would go up or down. However, as the predictions are based on human psychology and market behaviour. Pixabay

Gains from stock markets are directly proportional to the risk factor. Risky organisations tend to offer high returns while safe ones have low-interest rates. Online trainings help you understand everything right from the basics of trading so that you don’t end up losing your hard-earned money. The training modules contain complete details about stocks, portfolio, stock exchanges, and stock marketing myths. You get an understanding of key financial ratios like earnings per share ratio, return on equity ratio, debt to equity ratio, stock prices, price-earnings ratio, and dividend yield ratio. Finally, the fundamental and technical analysis of stocks helps you to strengthen your understanding and be a game-changer in the stock market. 

Advantages of the online beginners trading certification training

At every point, there are people who keep on predicting whether the stock market would go up or down. However, as the predictions are based on human psychology and market behaviour, deriving accurate information of stocks’ performance is not possible. While your dependency on predictions can lead to loss, good knowledge about various stocks, financial ratios, myths, and fundamental and technical analysis can provide maximum benefits. Enrolling in one such training online provides multiple other benefits. Apart from guiding you to delve safely in trading and investment, beginners trading certification training ensures self-paced learning. The training includes multiple modules, assignments, assessment tests, quizzes, and exercises to make your learning simple and interactive. As a part of the training, you work on a project where you learn to build, manage, and grow your virtual portfolio. You are provided with some virtual cash and real stock market data from NSE stock market to practice your trading skills.

Stock markets
Gains from stock markets are directly proportional to the risk factor. Pixabay

Who should take the training?

The training content is beginner-friendly and thus, anyone can enrol in the training and learn the tips and tricks of investing in stocks. Sreemoy Kar Roy, a student of the University of Calcutta, was searching for internships on an online platform when he figured out this 4-week training that teaches stock market trading strategies. His friends suggested him to consider YouTube tutorials over a training, but he found the information either too cluttered or too complicated in those videos. He finally chose the online training which helped him find a path to pursue a career in trading. He completed the whole training and then invested a small portion of his father’s savings in the stock market. With the help of empirical stats that he learnt through the training, he split the money into 3 parts and invested it in Power Finance Corporation (PFC), Sun TV Network, and Tata Motors. At the end of the week, his portfolio showed a gain which brought immense happiness not only to him but to his father as well. Sreemoy learnt a new skill, made a considerable profit out of trading and realised his passion to work within the trading industry. 

Also Read- Japanese Imaging Giant Nikon Unveils Latest FX-Format Camera

Just like Sreemoy, anyone with little to no knowledge can enrol in the training and can get a detailed knowledge of investment in the stock market. The training opens up multiple job opportunities such as that of securities, commodities, and financial services sales agent, personal financial advisor, financial manager, actuary, and financial analyst, etc. Individuals who are passionate about developing their research and analytical skills, financial management skills, record keeping skills, and are determined enough to deal with the risks and stay in the game are the ones who can enrol in the course and be the master traders. 

Courtesy: Internshala Trainings (training.internshala.com) – e-learning platform to learn new-age skills from Internshala.