Friday, September 28, 2007

Y invest when young?

One of the strategy of investement is invest when young. But some would think that they hav not enough capital to invest when young. Lets c the example below.

Here, A invests 1000 every year and maintain it 10 years, if the return is 10% every year, he got 17,531 at the end of 10 years, then his total return is 75.31%.
B only start invests in year 6, he invests 2000 every year and maintain it til year 10. If the return of every year is same with A, 10%, he got 13,431 at the end of year 10, his total return is 34.31%.

Obviously, their total returns are different although their capital and the retrun of every year are same. A got 75.31% return while B only got 34.31%, y like this?

Albert Einstein said compound interest is the greatest mathematical discovery of all time.

What is compound interest? Compound interest is the concept of adding accumulated interest back to the principal, so that interest is earned on interest from that moment on.

The key factor of compound interest is time. The longer the time, the effect of compound interest is more obvious. When young, U mayb hav not enough capital, but U hav enough time to lets the compound interest grows.

The most important is U hav to start invest now and not wait until u hav enough capital, U hav 2 remember that the key factor of compound interest not u hav big capital, but u hav many time.

compound interest = little capital + many time

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