Compound interest

Compound interest means that in addition to the interest generated by the principal of a fund, the interest generated in the previous interest-bearing cycle is also calculated in the next interest-bearing cycle.

Where there is compound interest, there is simple interest.

Simple interest

Simple interestRefers to a fund no matter how long the deposit period, only the principal interest, and the previous period of interest in the next interest cycle does not calculate the interest method.

Compared with simple interest, compound interest is like a financial snowball effect.

So, how to make good use ofCompound interestThe effect of accumulating wealth?

For fund investment, it makes more sense to go far than to go faster. Because what the fund must pursue is not profiteering, but compound interest. The secret of compound interest is that it takes a long time, and it is also the catalyst of time. Compound interest will exert the power of atomic bomb.

Let's first take a look at the comparison between simple interest and compound interest.

Suppose the investment principal is 100000 and the annualized rate of return is 10%. Ten years later, the simple interest becomes 200000 and the compound interest becomes 259000; after 20 years, the simple interest is 300000 and the compound interest is 672000; after 80 years, the simple interest is 900000 and the compound interest is 204.84 million.

The difference between simple interest and compound interest lies in that compound interest adds the interest generated to the interest-bearing queue.
In the above example, after 80 years, the gap between simple interest and compound interest is not generally large. If the time is lengthened, then the gap will be even wider.

The basic principle of compound interest can be applied to any type of fund, in other words, the accumulated reinvested income year after year can create considerable potential returns.
Although the net worth of the fund may not rise forever, butFor long-term investors, compound interest is still an effective strategy to increase wealth.。

The fund is determined to invest in "time compound interest effect"

Interpretation of the Power of Fund customized savings in compound interest statement

"the greatest force in the world is not the atomic bomb, but compound interest! "Einstein's words enable the working class with a low monthly income to realize their dream of one million dollars.

Let's take a look at some typical cases of "investing compound interest effect with the help of funds to realize the dream at the stage of life", ↓↓↓.

Case 01

Same 8%, different result

In Canada, a wealthy barber once advised her friend to be an investor rather than a depositor. He also told his secret to his friends.

She says she and her sister have a good habit of saving 10% of their income every year. The difference is that her sister puts the 10 per cent in the bank, while she puts C $5000 saved into mutual funds with an average annual income of 8 per cent.

Five years later, her investment has reached 29335 yuan; although the bank's annual interest rate of zero deposit and withdrawal is also 8%, her sister's deposit principal and interest after five years is only 26600 yuan, which is 2735 yuan less than him.

The rate of return is 8%. Why is there such a big difference between the two sisters' money five years later?

Because the barber knew very well that the essence of investment was to enjoy the benefits of compound interest, she became rich. Compound interest is compound interest, which means that the annual income can also generate income, which is commonly known asProfit roll interest。

On the other hand, her sister only knows how to deposit money in bank insurance, but she does not know that although the principal is safe, she can only enjoy interest income once every five years, that is, simple interest, and the difference between simple interest and compound interest can be reflected in the calculation formula. So it's easy to get beneficial information from it.
Compare with "five-year deposits and fund investments" in the above case:

• Five-year zero deposit and withdrawal, principal and interest after maturity and:

  5000X (1 / 8%) X4 / 5000,600 yuan

• Invest in mutual funds, total assets after five years:

  5000X (1 / 1.08 / 1.082 / 1.083 / 1.084) = 29335 yuan

Compound interest is known as the eighth wonder of the world because it reveals the secret of the rapid growth of wealth. As long as you keep investing when you are young, as time goes on, the return will be more and more.

02

There is no hurry to redeem it, 225000 becomes 1 million in 13 years.

Stocks rise and fall, most office workers do not have time to study individual stocks or industrial trends, the probability of failure is greater than success, but this does not mean that investors should not invest.

Especially in the era of low interest rates, if we still deposit money in the bank and deduct inflation, the money will be saved less and less.

Zhang Fangfang (pseudonym) 13 years ago, she bought a stock fund with a fixed investment of 2500 yuan, after deducting 90 cycles in a row. Because of the account conversion, Zhang Fangfang forgot to continue to deposit withholding funds in the fixed investment account, so that the account cancelled the deduction, instead of continuing to make deductions.

However, Zhang Fangfang did not redeem the fund because of this. as a result, when the stock market was better, she found that the original deduction of 225000 had become more than 1 million over the past 13 years.

From the above two examples, we can see that from now on, as long as we know how to save 1000 yuan a month in life and give full play to Einstein's greatest "power of compound interest", it is not a dream to realize one million in 30 years' time.

In terms of the power of compound interest, the rate of return and the length of time are like two levers to prop up one's own wealth. As long as the two can be increased and lengthened, the same amount will have an unexpected effect.

In the process of investment, there will be at least one business cycle. If investors can't predict the highs and lows of the market (in fact, no one can), and they are not experts in stocks, then they shouldMake good use of the power of time and wait for a return with a decentralized investment strategy。

As long as the long-term trend of the fund is positive and the investment performance has been sound for a long time,When the stock market is low (such as the current time point), investors should insist on investing.Take advantage of this to accumulate more units and patiently invest for a long time in order to achieve the original default financial goal and enjoy the compound interest effect of amazing asset growth.

Fund investment is: simple things to do, simple things to do repeatedly, repetitive things to do seriously. When you stick to a round of bulls and bears, you will thank you who started before and held on to the end.

The past performance of the fund does not predict its future performance, and the performance of other funds managed by fund managers does not constitute a guarantee of fund performance. Investment is risky, please read the fund contract and fund prospectus carefully to understand the specific situation of the fund. The information contained in this report does not constitute any investment advice or any guarantee of future returns and does not represent any commitment or expectation of investment strategy or return on investment. The contents of this report should not be used as investment, legal, tax or other recommendations.