Compound Interest: The Power To Accelerate Your Wealth Building Process
The power of compound interest is not something new under the sun. It has been always been there even in the days of old. It was Albert Einstein who once said that it is the most powerful thing in the universe. A lot of people knew it but only the selected few had discovered and tapped its true power.The reason why a lot of people are in debt is because they have not utilized the little secret of compounding. It might sound complicated for most of the people in the world today. But it is so simplistic that will not require the stroke of a genius like Albert Einstein. Let us say for example that you have opened a bank savings account worth of $10,000. At three percent per annum, you will have $10,300 at the end of the year. By applying the power of compound interest, you can have the same amount of money that earns ten percent per annum. You do the math and tell me the difference. That's a lot of money. You can retire a billionaire by means of compounding alone.
How would like to retire free from any worries of monthly mortgage? How about being financially free at your forties? Then let this tool of compounding build you and empower you. Literally, you can build a financial empire by this method. At this point in time, only multi- national corporations are the only ones utilizing this tool. There is no rule in the financial world that limits this method to big companies. Even a simple minimum wage earner can take advantage of this powerful tool. This force of compounding can work effectively in our benefits. The general rule of thumb is very simple. The more frequent compounding is, means more money in your treasure chest. Compounding on a yearly basis is good. But if you can earn interest on a semi-annual compound interest, it will increase your portfolio. Think with me if your compound interest is earned on a monthly basis. How about everyday compounding? You can be the next Bill Gates. You can sit back, relax, and watch your money work for you.
If the power of compound interest excites you to move and invest right away, hold your horses and take into considerations a few things. There are three things that you have to consider with this powerful force. First, take a look at the interest rate that you earn on your investment. Look for an investment vehicle that has a minimum return investment of five percent. Anything lower than this, you should have second thoughts investing. Secondly, consider the duration that your money will stay in an investment to earn a compound interest. The longer the duration that your money can stay, the bigger the interest rate can be. Lastly, you have to consider the tax rate that you have to pay. No taxes to pay will mean more compounding rate for your money. Compound interest will definitely bring you to your wealthy place than any other method of investment.
by: William WL Tan