Once, a king, extremely pleased with his wise and able minister, said: “What would you like as a reward? Ask and it shall be granted.” The minister knew he couldn’t sound greedy but at the same time, in his 15 years at the royal court, the old king had never been so generous. The minister replied humbly: “Your Highness, it has indeed been an honor to serve you at your court for all these years. That itself is my reward.”
The king was pleased with his humble servant. But he insisted. The minister, after much hesitation, replied softly: “Your Highness, I request you to give me a grain of rice.” The king said: “Minister, now you are wasting my time. I insist you ask for your reward, else I’ll have you thrown in the dungeons.” The minister replied humbly: “Your Highness, if you insist, then I shall accept the rice every day for the next two months. Starting with one grain of rice tomorrow, the quantity can be doubled each day over the previous day for the next two months.”
The king was amused but he decided to play along. At the same time, he was impressed with his minister’s selfless bend of mind. He mentally patted himself for being able to cultivate such loyal selfless employees. Hence, from the next day onwards, the supervisor of the royal granary had one grain of rice delivered to the minister’s house. On Day 2, two grains of rice were delivered. On Day 3, when the supervisor delivered three grains of rice, the minister corrected him and said that he was given one grain short; the double of the previous day (Day 2, two grains of rice) was four and not three. The supervisor smiled and noted the error. “Anyway, what difference does it make to this man or the royal granary,” he thought to himself.
On Day 21, the granary supervisor paid a visit to the king. He had come to warn the king of a possible food shortage in the kingdom in coming month or so. “Why will that happen,” the king wanted to know. The last he heard was that the granaries were full and would last through any eventuality. The supervisor, with his eyes downcast, said: “It’s the reward you bestowed on the minister, Your Highness!” The king had almost forgotten about that ‘joke’.
The supervisor explained: “Sir, the average weight of a grain of rice is 0.30 grams. As per your orders, today, the minister had to be given, 10, 48,576 grains of rice which works out to 315 kg by weight. At the end of two months (60th day), we would have to give the minister 865,435,910,144 metric tone of rice, keeping in mind his wish of getting double the amount of rice from the previous day! Our godowns don’t hold that much food grain.” Shocked, the king realized that he had been brought to the brink of bankruptcy by his wise minister and that too at his own insistence.
For those seeking a lesson out of this chapter on geometric progression, its an oft-given advice by your financial planner. Start investing regularly and start now.
The point that needs to be driven home is not the size of your regular investment, but its commencement. So many of us have put off starting out on an investment plan just because we thought the amount we could spare towards our savings after meeting all expenses would not be worth the effort.
The bottom line is: probably years have gone by without making a start. (Showing you the difference made to your corpus at the age of 60, if you had started investing at the age of 25 or 30, is not something we will waste your time with)
In the above story, the king had been subjected to the compounding effect of a mathematical geometric progression. In the case of investments, though we wouldn’t be that lucky so as to have our money doubled every day, nonetheless one can see the benefits of compounding over a longer term, say over the years.
A sum of Rs 10,000 invested for 35 years growing at 15% pa compounded yearly will grow to more than Rs 13 lakh. A sum of Rs 10,000 invested every year for 35 years grows to more than Rs 1 crore in nominal rupees at the same rate. So, start your disciplined investment plan with your grain of rice today.
The king was pleased with his humble servant. But he insisted. The minister, after much hesitation, replied softly: “Your Highness, I request you to give me a grain of rice.” The king said: “Minister, now you are wasting my time. I insist you ask for your reward, else I’ll have you thrown in the dungeons.” The minister replied humbly: “Your Highness, if you insist, then I shall accept the rice every day for the next two months. Starting with one grain of rice tomorrow, the quantity can be doubled each day over the previous day for the next two months.”
The king was amused but he decided to play along. At the same time, he was impressed with his minister’s selfless bend of mind. He mentally patted himself for being able to cultivate such loyal selfless employees. Hence, from the next day onwards, the supervisor of the royal granary had one grain of rice delivered to the minister’s house. On Day 2, two grains of rice were delivered. On Day 3, when the supervisor delivered three grains of rice, the minister corrected him and said that he was given one grain short; the double of the previous day (Day 2, two grains of rice) was four and not three. The supervisor smiled and noted the error. “Anyway, what difference does it make to this man or the royal granary,” he thought to himself.
On Day 21, the granary supervisor paid a visit to the king. He had come to warn the king of a possible food shortage in the kingdom in coming month or so. “Why will that happen,” the king wanted to know. The last he heard was that the granaries were full and would last through any eventuality. The supervisor, with his eyes downcast, said: “It’s the reward you bestowed on the minister, Your Highness!” The king had almost forgotten about that ‘joke’.
The supervisor explained: “Sir, the average weight of a grain of rice is 0.30 grams. As per your orders, today, the minister had to be given, 10, 48,576 grains of rice which works out to 315 kg by weight. At the end of two months (60th day), we would have to give the minister 865,435,910,144 metric tone of rice, keeping in mind his wish of getting double the amount of rice from the previous day! Our godowns don’t hold that much food grain.” Shocked, the king realized that he had been brought to the brink of bankruptcy by his wise minister and that too at his own insistence.
For those seeking a lesson out of this chapter on geometric progression, its an oft-given advice by your financial planner. Start investing regularly and start now.
The point that needs to be driven home is not the size of your regular investment, but its commencement. So many of us have put off starting out on an investment plan just because we thought the amount we could spare towards our savings after meeting all expenses would not be worth the effort.
The bottom line is: probably years have gone by without making a start. (Showing you the difference made to your corpus at the age of 60, if you had started investing at the age of 25 or 30, is not something we will waste your time with)
In the above story, the king had been subjected to the compounding effect of a mathematical geometric progression. In the case of investments, though we wouldn’t be that lucky so as to have our money doubled every day, nonetheless one can see the benefits of compounding over a longer term, say over the years.
A sum of Rs 10,000 invested for 35 years growing at 15% pa compounded yearly will grow to more than Rs 13 lakh. A sum of Rs 10,000 invested every year for 35 years grows to more than Rs 1 crore in nominal rupees at the same rate. So, start your disciplined investment plan with your grain of rice today.
