Are you ready for this?
What do you get if you combine regular, consistent investing… with the power of compound interest?
Massive growth for your wealth.
I’m not kidding.
Compound interest is basically interest on interest.
Benjamin Franklin says it best:
“Money makes money. And the money that money makes, makes money.”
Compound interest is both unbelievably simple and genuinely unique.
It’s not hard to see why with this example:
You have a sum of money, say £2,000.
That £2,000 earns interest every month. Let’s say 3%.
Now, if you don’t add anything else to that initial £2,000 over the 12 months, that sum would total £2,852 with just the accumulated interest.
But wait. Hold on a minute.
If 3% of £2,000 is £60, it should be 12 x 60 over 12 months. That’s £720, right?
Not with compound interest it isn’t.
Because, not only do you get 3% every month added to each month’s total, you get 3% on the 3%.
That’s the money that makes money, making money.
It’s what Albert Einstein called the Eighth Wonder of the World.
You can try it for yourself with our very own compound interest calculator.
Click the link in the description box below to discover how much your money will grow over time if you invest it and re-invest your profits every year.
Let’s examine compound interest in a little more detail to measure its real power.
There’s a story called One Grain of Rice: A Mathematical Folktale, written by Demi, a famous American children’s author.
It features a girl called Rani.
And, for every good deed done, she is awarded rice for 30 days.
She receives one single grain of rice on day one.
The number of grains of rice awarded each day is doubled over the 30 days.
Any idea how much this comes to by day 30?
A staggering 536 million, 870 thousand, 912.
Okay, this is 100% compounding, BUT it highlights the power of compound interest.
I know… let’s get our very own Investment Mastery compound calculator out right now and have a little play.
As you will see, it is really easy to use and you can simply adjust the amounts in each box easily to see how much you could get over time.
You will see, too, how adding a little more each month makes such a massive difference to your totals.
So get it up now and put the following amounts in the appropriate boxes.
We’ll stick with the initial investment of £2,000 and keep the interest at 3%.
As you can see here, after 12 months with nothing else added to that amount, apart from the interest, we end up with £2,852.
But now watch this!
This is pure magic.
Let’s see what happens when we do top up the initial investment amount.
Let’s put £100 in the “Extra A Month” box.
See that? Your £2,060 in January becomes a mouth-watering £4,132 by December.
It’s nuts right, but absolutely TRUE.
Now keep watching…
What happens if you keep adding £100 every month for 5 years?
You’d have £27,517
After 10 years?
And that example is with just £100 added every month to your initial £2,000 over 10 years with the 3% interest.
Imagine what you could end up with if you topped up more each year?
Try it now.
Put £1000 in the Additional Top Up” box. Remember, that’s just £1000 added once, at the start of each year.
See what you get now after 10 years?
Can you believe that!!
And 5 years later that number turns to 1,530,580.
That is the impact of compounding!
So there you go.
You’ve got your Initial investment Amount. Interest. Extra A Month. Additional Top Up.
And of course, don’t forget to change the currency to the one that suits you.
Try it for yourself. Maybe you have a sum in mind you want to achieve by however many years?
Using our compound calculator makes it all easy to plan for your future and grow your wealth.
Now the important thing to remember…
is this account where this money magic is happening, is growing so powerfully because you are not withdrawing any of the money from it.
I repeat, you are not touching it, EVER.
Not even once.
You’re just leaving it there. To GROW.
This is essential to remember.
What you are doing is REINVESTING.
Reinvesting is one of the great secrets to growing your wealth.
It’s what all the multi-millionaires do, the billionaires.
Put it this way, they don’t work to earn their vast wealth. They let the money work for them.
And that’s what compound interest does.
So what does “compound interest” mean?
It means more money to you over time.
The longer you keep reinvesting, the more money you will earn.
Sorry, the more money your money making money will earn.
Maybe you have already been introduced to the power of compound interest? If so, tell us in the comments below as it will be fascinating to found out what results you have been getting.
Making the most of Compound Interest
As you have seen with the compound interest calculator, your money will grow over time if you invest it.
Then re-invest your profits every year.
Compound interest is vital in finance.
It lies at the heart of many investing strategies.
For instance, banks benefit from compound interest.
They benefit because they lend money.
Then re-invest the interest they receive by issuing loans or making their own investments.
Everything banks do is about making money.
Compound interest increases their profits every second of the day and night.
Compound interest is the secret to growing your wealth
Of course, compound interest isn’t a secret.
Mathematicians first discovered it in Babylonian times around 4,000 years ago.
And the most famous investor of modern times, Warren Buffett, credits his wealth to “living in America, some lucky genes, and compound interest.”
Thing is, compound interest is not just powerful…
Compound interest is the driving force that grows your wealth.
It is central to strategies of the best investors in the world.
That tells you everything you need to know.
You should make it yours too.
Then sit back and watch your wealth grow.
If you were unaware of it before, you are now – compound interest is a miracle.
Deceptively simple but awesomely effective. It is worth remembering it is always there working behind the scenes for you every time you invest and earn interest.
And earning interest on the interest!
You can find out more here with our compounding calculator.