What is a compound interest? Today we’ll talk in detail about what a compound percentage is. Do you think it is possible to become a wealthy person and achieve financial freedom by saving 5-20% of earnings every month?
Yes it is possible, but only under two conditions: money is invested + a compound interest is used (also its names: reinvestment, capitalization).
How it works
Suppose you invested 100,000 rubles for a period of 1 year and received (one year later) a profit of 15% per annum (15,000 rubles). This money can be withdrawn and spent, but financial freedom cannot be achieved in this way.
And you can invest this money again. Then in a year we will get again 15% of 100.000 rub, but another + 15% of those 15.000 rub. Then, again, we invest all the profit received over the year.
It seems that this is a trifle, but it is in this "trifle" that lies the magic of long-term investment.
In 10 years, a complex percentage will turn our 100,000 rubles into 404.000 rub! And for 20 years at 1.636.000r. And this is only from the initial amount!
But we can add new money to the investment account every month. For example, at 5.000 per month for the same 10 and 20 years. See what happens: in 10 years, your total capital will be 1.634.758 rubles, and your monthly passive income will be: 17.111 rubles. But after 20 years, the figures are generally staggering: capital is 7.843.710 rubles and monthly passive income: 84 599 rubles.
This is how, and not otherwise, they achieve financial freedom.