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Do you know what compounding interest is?

Compounding interest is the greatest wealth creator, if you want money to work for you, this is the way.


Lets make up an imaginary scenario;

You invest $100 dollars into an stock market account that will give you 7% interest, the first year you will have $107 dollars ($7 dollars profit), second year you will calculate the return based on $107 which will give you a $7.49 dollars profit total of $114.49, 3rd year the return will be $8.01 total of $122.50 and so forth.

this is not adding the price of the stock/bond to increase.

The money will grow exponentially.


Issue is Savings accounts, Certificate of deposits, money market funds etc will give you a 1-2% interest return (at best) which will barely keep up with inflation.


Stock market although volatile is one of the few ways to create and build wealth, real estate is another way to make 7-8% interest on your money, however the amount of money required to start with is usually greater unless you are using a REIT to invest.


Bottom line do not fear the stock Market, understand it and use it.


Till next time,

JL

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