Empowering Your Financial Journey: How High School Math Skills Make a Difference

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₹100, and the market decreases by 20%, then the position will come down to ₹80. When it increases again after this by 20%, the new position will be at ₹96 which is the actual 20% increase from ₹80. Simple interest and compound interest are both different mathematical expressions used to measure returns.

For example, if ₹100 become ₹200 after 4 years. In simple interest, it has grown at 25% annually, while in compound interest, the growth rate is 18% annually. When redeeming your investments, the account statements given by wealth investment firms can be puzzling, concerning the profit gained, and the capital invested.

For example, if you have invested 1 Lakh in the market and it grows to 2 lakhs, this means it has doubled. When you redeem 1lakh from the final amount, you are withdrawing a mix of your initial capital and some of the profit. 50% of 1 Lakh (INR 50,000) is your returned capital, and the other 50% (INR 50,000) is the profit.

This simple distinction between the capital amount invested and the actual profit gained often confuses layman investors when they receive their account statements. When basic maths is applied to this issue, it resolves immediately. Knowing investment terms such as IRR (Internal Rate of Return) and XIRR (Extended Rate of Return) is also very helpful.

IRR is defined as the annual rate of growth an investment is expected to generate, and XIRR is a detailed version of the former which assigns specific dates to each cashflow. “Any domain can be fun to explore as long as we do the thorough research required to understand it properly. Think of maths as your life-long BFF that will help you get savvy with your investments, and also enjoy the process of investing as a whole," Kishore concluded.