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$1,000,000.00
$1,000,000.00
$1,000,000.00
$1,000,000.00
$1,000,000.00
$1,000,000.00
$1,000,000.00
$1,000,000.00
$1,000,000.00
$1,000,000.00
$1,000,000.00
$1,000,000.00
$1,000,000.00
$1,000,000.00
$1,000,000.00
$1,000,000.00
$1,000,000.00
$1,000,000.00
$1,000,000.00
$1,000,000.00
GO to
the last
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$.01
$.02
$.04
$.08
$.16
$.32
$.64
$1.28
$2.56
$5.12
$10.24
$20.48
$40.96
$81.92
$163.84
$327.68
$655.36
$1,310.72
$2,621.44
$5,242.88
11
days
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Money, Time and Compound Interest:
I'm sure you've heard the expression many times that "Time is Money." With
respect to financial independence, time is your greatest asset. Time is
something each one of us has a certain amount of. Obviously some of us will have
more time than others, but most of us waste valuable years that we could be
utilizing to create wealth. It's your job and yours alone to use the time you
have to your advantage.
Suppose you were given the option between receiving:
Option 1 - A one time lump sum cash payment of $1,000,000; OR
Option 2 - An initial payment of a penny plus interest compounded monthly
at the rate of 72 percent daily for a period of 31 days. With 72 percent
interest, you will double your penny every day.
Assuming that you will still be alive at the end of the 31 day period and you
really don't need it for emergency, which one would you choose? If you are like most people, you would probably
choose option #1 - a one lump sum cash payment of $1,000,000. Let's see if you
made the right choice: Looking at the chart on the right, had you chosen the
Option #2, you would ONLY have about $5,243 even after 20 days.
Click Here to see the last 11 days to see how if you
made the right choice.
If you would have invested $10,000 for
10, 25 or 40 years:
|
|
You'll Have This Much |
|
Return On Investment |
In 10 Years |
In 25 Years |
In 40 Years |
| 0% (Mattress) |
$10,000 |
$10,000 |
$10,000 |
| 3% (savings account) |
$13,494 |
$21,150 |
$33,151 |
| 5% (bond) |
$16,470 |
$33,863 |
$70,399 |
| 11% (stocks and real estate) |
$29,891 |
$154,478 |
$798,345 |
You can't earn good returns on
your money if you keep your money under the mattress. When you do
invest in growth investments such as stocks and real estate, don't follow
new investment after another trying to beat the market average returns.
Put your money in the market (Especially mutual funds)
and just let it grow.
(See how much you'll have in the future with given interest with Financial Calculator) |
Rule of 72 (Power of compound
interest):
As you can see from above chart how investing
$10,000 with a return of 11% will give you almost $800,000 in 40 years. How
is that possible? well it's because of compound interest. Compounding means
that interest is paid on interest in addition to the principal. Compound
interest is far more powerful than most people realize. Compound interest
should be one of your financial success tools. The rule of 72 says that to
find the number of years required to double your money at a given interest
rate, you divide the interest rate into 72.
For example, if you want to know how long it will
take to double your money at 10 percent interest, divide 10 into 72 and you'll
get 7.2 years. What that mean is that your money will double EVERY 7.2 years.
Your $1 will turn into $64 in 43.2 years (that's 46 times your initial
investment). With only 3 percent return on your money, you will only receive 4
times your original investment even after 48 years and it will take you 144
years to get the same $64 (see the second chart below).
|
# years
to Double your money @ 10% |
7.2 years |
14.4 years |
21.6 years |
28.8 years |
36 years |
43.2 years |
| $1 (Initial Investment) |
$2 |
$4 |
$8 |
$16 |
$32 |
$64 |
With only 3% return, it will take you 24
years to double your money (72 divided by 3).
|
# years
to Double your money @ 3% |
24 years |
48 years |
72 years |
96 years |
120
years |
144
years |
| $1 (Initial Investment) |
$2 |
$4 |
$8 |
$16 |
$32 |
$64 |
If you want to know how much an investment will grow over a
set period of time, check out our compound
interest calculator. It will ask you for the dollar amount of your
investment, how long you plan to hold it, and an estimated return.
Next -->>
Investment Risks &
Rewards
Table of Contents
-
What is investing?
-
How to choose the best investment
-
Concept of investment return and Rule of 72
-
Investment Risks & Rewards
-
Different types of Risk
-
Benefits of Diversification & Asset Allocation
-
Questions you need to ask before investing
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