Power Of

Compounding
Raamdeo Agrawal
Learning Objectives

01 Simple & Compound Interest

02 CAGR

03 Rule of 72

04 Calculating Past Performance

05 How to Build Wealth?

Power of Compounding
 Simple Interest

Rs. Rs.
100 110
Invest Interest Returns
 Compound Simple
No. of Years
Interest Interest

259 200 10
236 190 9
214 180 8
Interest 195 170 7
177 160 6
161 150 5
146 140 4
133 130 3
121 120 2
110 110 1

100 100 0
Learning Objectives

01 Simple & Compound Interest

02 CAGR

03 Rule of 72

04 Calculating Past Performance

05 How to Build Wealth?

 Understanding CAGR

CAGR Compound Annual Growth Rate

CAGR measures the mean annual growth rate of an investment over the years
Calculating CAGR
Do You Want To
Learn A Simple
Method?
Learning Objectives

01 Simple & Compound Interest

02 CAGR

03 Rule of 72

04 Calculating Past Performance

05 How to Build Wealth?

 Rule of 72
To estimate how long an investment
will take to double at a given rate OR To estimate annual rate of interest
needed for an investment to
of interest double in a given timeframe

72 72
Years to Double CAGR
Annual Interest Rate Number of years

Consider that Annual returns is 15% Consider that An Investment Takes 5 Years to
Double

72 5 Years Approx.
72 15 % Approx.

15 5
Exercise Time
 How Many Years to Double the Money ?

7.2%
Retur
ns
72/7. = 10
Rule Of
2 years

72
10%
Retur
ns
72/10 = 7 years
Approx.
(7.2 years exact)

15%
Retur
ns
72/15 = 5 years
Approx.
(4.8 years exact)
Lets Calculate the CAGR Using Rule of 72?

10
Years 72/10 = 7 % Approx.
Rule Of (7.2% exact)

72 5
Years

15
72/5 = 14 %
Approx.
(14.4% exact)

Years 72/15 =5%

Approx.
(4.8% exact)
Learning Objectives

01 Simple & Compound Interest

02 CAGR

03 Rule of 72

04 Calculating Past Performance

05 How to Build Wealth?

How to figure out the past growth
CAGR for multiple years?
Present Value Future Value

You Should Have Any 3 Values

CAGR No. of years

 Power Table of 2

No. of Doubles Times

21 2
22 4
23 8
24 16
25 32
26 64
27 128
28 256
29 512
210 1024

e.g. - If an investment doubles 10 times, it will grow 1000 times

Calculating CAGR with Rule of 72
Example 1

1974 2024

Rs. 100 Rs.

1,00,000
Per Sq. ft. Per Sq. ft.
Present Value – Future Value –
Rs. 100 Rs. 1,00,000

You Should Have Any 3 Values

No. of years –
CAGR?
50 years
 4 Steps to
Calculate past performance

Times

No. of Doubles

Years to One Double

Apply Rule of 72

TDO 72
 1974 2024

Rs. 100 Rs.

1,00,000 4 Steps to
Per Sq. ft. Per Sq. ft.
Calculate past performance

TDO 72
No. of
= Rs. 100 to Rs. 1,00,000 1000 Times Doubles Times Times
21 2
22 4
is 210 1000 23 8
24 16 No. of Doubles
25 32
= Yrs / 10 50 = 1974 – 2024 5 26 64
27 128 Years to One Double

28 256
= 72/515% approx. 29 512
210 1024 Apply Rule of 72

(14.4% exact)
Exercise Time
Calculating CAGR with Rule of 72
Example 2

2004 2024

Rs. 500 Rs. 50,000

Per Sq. ft. Per Sq. ft.
Present Value – Future Value –
Rs. 500 Rs. 50,000

You Should Have Any 3 Values

No. of years
CAGR?
20 years
 2004 2024

Rs. 500 Rs. 50,000

4 Steps to
Per Sq. ft. Per Sq. ft.
Calculate past performance

Times
No. of Doubles Times
= Rs. 500 to Rs. 50,000100 Times 21 2
22 4 No. of Doubles
23 8
is 27 100 24 16
(26.75 exact) 25 32 Years to One Double
26 64
= Yrs / 7 20 = 2004 – 2024 3 approx. 27 128
(2.9 exact) 28 256 Apply Rule of 72
29 512
= 72/3 25% approx. 210 1024
(24.82% exact)
TDO 72
Learning Objectives

01 Simple & Compound Interest

02 CAGR

03 Rule of 72

04 Calculating Past Performance

05 How to Build Wealth?

How Do You Plan Your Future Wealth?
 2024 2034

₹1 ₹10
Lacs Lacs

29
Present Value Future Value
Rs. 1 Lac Rs. 10 Lacs

You Should Have Any 3 Values

No. of years
CAGR?
- 10
 4 Steps to
Future Performance

Times

No. of Doubles

Years to One Double

Apply Rule of 72

TDO 72
 4 Steps to
Future performance

No. of TDO 72
Doubles Times
10 Times 2 1
2 Times
22 4
23 8
is 23 10
= 3 times approx. 24 16 No. of Doubles

(3.25 times exact) 25 32

26 64
10 / 3 = 3 Years Approx. Years to One Double
27 128
28 256
72/3 = 25% Approx.
(24% exact) 29 512 Apply Rule of 72
210 1028
 Exercise Time

Let’s Go Back to Mental Calculation

If at the age 35, a person invests ₹150,000 in the market with an
annual return rate of 15%

how much will the investment grow in 10 years?

Present Value
Future Value?
Rs. 1.5 Lacs

You Should Have Any 3 Values

CAGR – No. of years

15% - 10 Years
 Number of
Doubling
doubling Accumulated
Period Growth factor
cycles in 10 Amount
Calculation
years

Rule of 72: Investment

10/5
25/5 =
=2 5 doubles: 150000*4 =
72/15 = 5 cycles 6,00,000
cycles
years years
approx. (2 cycles exact) 22 = 4 times
(approx.)
(4.8 years exact) (4 times exact)
What if you had invested the same amount at the age of 25
?
Table
Don't practice until you get it right
practice until you can't get it wrong
Thank
You