Compounding & Markets
Everyone is so baffled about the rise & rise of the Indian markets .
We have not seen any big correction over last four years that was a common phenomenon in the past .
To understand that , we need to understand the concept of compounding .
Linear math is very intuitive- if you ask someone what is 8+8+8+8 , you would get an immediate answer . But if you ask someone to calculate 8X8x8x8, it is not so easy. Understanding compounding is so unintuitive.
Compounding is taught in schools and people know it ,it is so obvious but comprehension of its magnitude is incomprehensible for the most.
Hope, by now ,you know that the Indian markets are also being driven by compounding of SIPs in MFs . That has been the big change in last 4 years.
It is so obvious yet the magnitude of it is incomprehensible for the most .
And keep in mind that it looks like it is still at a beginning stage , may be at 8x8 level but it is nowhere near 8x8x8x8 ….
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