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The science of compound wealth

 


The Science of Compound Wealth: How Ordinary People Can Retire Rich

By Faraz Parvez
Professor Dr. (Retired) Arshad Afzal
Retired Faculty Member, Umm Al-Qura University, Makkah, KSA
(Pseudonym of Professor Dr. Arshad Afzal)

💡 Why Most People Miss the Wealth Train

Wealth, for most, is imagined as a result of luck, inheritance, or extraordinary talent. The truth is more humbling—and empowering:
Real wealth is built slowly, predictably, and mathematically.

The engine that powers this is compounding—what Albert Einstein called the “eighth wonder of the world”. Those who understand it earn from it. Those who don’t, pay for it.

Sadly, many delay saving and investing until it’s too late. They work for money all their lives, but never make money work for them.

📊 What Is Compounding?

Compounding is the process of earning returns not just on your original investment, but also on the returns you’ve already earned. It’s growth on growth—wealth that snowballs over time.

Example:
If you invest Rs. 10,000 and earn 10% annually, after one year you have Rs. 11,000.
In year two, you earn 10% not on Rs. 10,000, but on Rs. 11,000—making Rs. 1,100. This continues, and your growth accelerates every year.

📈 Why Starting Early Changes Everything

Two friends, Ali and Bilal, invest differently:

  • Ali invests Rs. 10,000/month for 10 years, then stops.
  • Bilal waits 10 years, then invests Rs. 10,000/month for 20 years.

Even though Bilal invests twice as much money, Ali ends up with more wealth at retirement—because his money started compounding earlier.

Lesson: Time in the market beats timing the market.

💵 How Much Can You Really Make?

If you invest Rs. 20,000/month in a stock index fund or ETF at an average 10% return:

  • After 10 years → Rs. 38 lakh
  • After 20 years → Rs. 1.44 crore
  • After 30 years → Rs. 4.3 crore

This is without winning the lottery, running a big business, or taking extreme risks. Just discipline + patience.

🌍 Options for Pakistanis & Global Investors

In Pakistan:

  • Mutual Funds & SIPs: MCB, HBL, Meezan funds
  • PSX Blue-Chip Stocks: Engro, Lucky Cement, HBL, Systems Ltd
  • Naya Pakistan Certificates: Dollar or PKR-denominated fixed income
  • Real Estate Investment Trusts (REITs)

Globally (through apps & brokers):

  • Index Funds: S&P 500, Nasdaq 100 ETFs
  • Dividend Stocks: Johnson & Johnson, PepsiCo, Unilever
  • Tech Giants: Microsoft, Apple, Nvidia

⚠️ Mistakes That Kill Compounding

  1. Starting late – You lose the most powerful years.
  2. Stopping investments – Breaks the snowball effect.
  3. Pulling money out early – Compounding needs uninterrupted time.
  4. Chasing quick profits – Turning investing into gambling.
  5. Ignoring inflation – Returns must beat rising costs of living.

🧠 The Compounding Mindset

To build wealth, you must:

  • Live below your means to free up investable income.
  • Automate investments so you don’t skip months.
  • Reinvest all earnings instead of spending them.
  • Be patient—compounding works best over decades.

📿 Spiritual Wisdom on Wealth

Islamic tradition values Halal earnings, patience (Sabr), and gratitude (Shukr). Wealth is a trust from Allah, meant to be managed with integrity and generosity.
Compounding teaches humility—you plant seeds today, not for instant fruit, but for a harvest years later.

🌟 Final Words

You don’t need to be rich to start investing. But you must start to become rich.

Whether you begin with Rs. 5,000 or Rs. 50,000 a month—time, discipline, and compounding will turn it into a fortune.

The best time to start was yesterday. The next best time is now.

📚 Read More on My Blogs


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