Compound interest is called by Einstein as the 8th miracle in the world. Compound interest can help us to achieve financial freedom. Financial freedom may let people to do what he/she likes and enjoys. For most of us, we live in a dilemma. When we have time, we don’t have money to make a trip budget. One the other hand, when we have money, we do not have time to travel. However, financial freedom gives people freedom travel any time, they have opportunities to visit the 7 wonders in the world.
To make compound interest work better for us, we need to get to know well about main points of compound interest.
- Time is the friend of compound interest. The longer period of investment, the more effects compound interest makes. We may check according to 10% annual rate of return to look through how we can get investment increase quickly by utilizing compound interest.
|Year||Accrue (%)||Year||Accrue (%)||Year||Accrue (%)|
We can draw the graphics according to the figures in the above table.
We draw a conclusion that with the time lengthening, increase speed is faster and faster. Compound interest likes long-term investment.
- If annual rate of return increases 2% more, from 10% to 12%, after 30 years the amount of principal will change from 16-fold to 29-fold.
- During the course of our investment, we not only need to pursue higher annual rate of return, but also need to pay attention to the service fee charged. Even 1% service fee directly affects the total return for next 30 years.
- Compound interest likes faster cash flow. Cash flow faster, yield increases faster. If we assume one investment reaches 365% annual return rate, it looks like that, on the average, every day should achieve 1%. But actually if every day achieves 1% return, then total annual return rate would be 3778.34%. Isn’t it incredible? Therefore, during investment we should speed up capital rolling and increase capital use rate.
The 8 world miracles are all friends to one another. If you like the 8th miracle, the other 7 wonders will like you too, and they will send you invitation.