What Is Compound Interest?
A definition taken from the Calculator Site says:
Compound interest is the concept of adding accumulated interest back to the principal sum, so that interest is earned on top of interest from that moment on. The act of declaring interest to be principal is called compounding. Financials institutions vary in terms of their compounding rate frequency – daily, monthly, yearly, etc.
To learn more about why Einstein called compound interest the 8th wonder of the world, take a look at the calculations below.
The Power of Compound Interest
Assuming you have a £1000 to invest and compare it against the following percentages:-
Calculations at 3% yearly interest rate
3% interest at 1 year grand total = £30
Calculations at 12% yearly interest rate
12% interest at 1 year grand total = £120
Calculations at 40% yearly interest rate
40% interest at 1 year grand total = £400
This example shows that the bigger the percentage rate the bigger the money on the interest and so on and so forth.
Obviously, anyone looking to increase their money invested would much rather go for the higher interest rate. Imagine you had £5000 or more to invest???
However, the only place I know where anyone can benefit from high increases (returns) like this is trading the market.
The banks do not offer high interest rates the last time I checked.
I’ve not found any bonds in the UK offering 40% interest rates, the highest I found was 12%.
Another way to understand compound interest rates, just look at how fast credit cards and other high interest debts grow (see the loan calculator below).
This is the power of compound interest, you can have it working for you by trading the markets or against you by owing on your credit cards or other high interest debts.
Why Compound Interest?
Today I took a R10 (South African Rand) to my local bureau de change and I got 50p back! If you think you don’t need compound interest, let currency devaluation persuade you. I personally find trading the markets helps to offset the currency devaluation process.
I mean how much would your money in the bank be worth 5 or 10 years from now? Compound interests can help your money grow faster as you’ve seen above. I’m going to be following ZAR/GBP forex trades with a keen eye you can bet on it.
If you want to know more about trading the markets you do need to follow someone like me who knows what they are doing or learn yourself. Either way, get yourself a copy of Nicholas Darvas books, ‘How I Made $2,000,000 in the Stock Market’
If you want to copy my trades fill out the form here: Copy Eruvwu’s Trade
Disclaimer: As mentioned in previous posts, I am not a financial adviser or FCA trained. However, I have been successfully trading the markets and have discussed in previous post my experience as shared with the audience on Wednesday 10th July 2019. So, based solely on my experience and knowledge I can guide individuals or groups to invest their money based on principles laid out which will involve time, commitment and money. Never invest more money than you are willing or able to lose.