Have you heard about compound interest?
That’s right, the Eighth Wonder of the World, according to Einstein.
Well, who’s going to argue?
Especially, when you discover just why he thought that.
Simply put, it’s what happens when the interest on your money in an interest account makes money.
The money that your money makes, also makes money!
Over the years, that money can swell into astronomical figures (as long as you don’t touch it during its growth period).
It’s a crazy mathematical equation but it really does happen.
All you need to do is use a compound interest calculator to see for yourself!
Go on, give it a go, you’ll be blown away.
Now, what you may not know is, compound interest has a twin.
It’s called Compound Growth.
The good thing is, you can use both to your advantage to grow your wealth even further.
First off, let’s examine the difference because it is very small, yet highly significant.
Compound Interest vs Compound Growth:
Compound Interest is the term given for the money that gets added to your investment sum every year (or month if you have an account that does that).
Now, the following interest period will see the current sum increase by that specific rate of interest – but the interest that had already been added the period before will also be making you money in this new interest period.
That’s the money that your money makes also making money.
And it’s solely down to interest, nothing else.
This is why when looking for an investment account you need to factor in the interest rate, plus the fees the provider will demand.
Some providers offer a better interest rate than others, but it is also essential to scrutinise the small print in the terms and conditions for any hidden extrasor fees.
Compound Growth is different to Compound Interest, because the growth comes from other sources as well as interest.
These sources are other investment assets such as stocks, shares, cryptos, commodities (oil/gold/silver) and even real estate (rentals/leases).
These assets are providing your main investment account with extra sources of income.
And these extra streams of income are generally, and consistently, way more than interest can give you.
Basically, Compound Growth ramps up your investment account far quicker than just an account that relies on interest.
BUT…
Imagine what Compound Interest and Compound Growth working together will do for your future wealth!
It’s an EXCITING thought, no?
The possible value of your investment over 20, 30, 40 years extraordinary!
Sky’s the limit? Well, there is no sky really!
As your compounding calculator will prove!
A Real-Life Example:
There are two investment portfolios.
Portfolio 1: Compound Interest
Portfolio 2: Compound Growth
Both portfolios have initial $50,000 sums invested.
Both portfolios have a growth rate of 8%.
Portfolio 1: Compound Interest (after 40 years) has accumulated a decent $200,000.
Portfolio 2: Compound Growth (after 40 years) has accumulated a whopping $1 million+!
This is why multi-millionaires have various investment accounts and portfolios which they build up over time.
And why they invest and trade in stocks and shares, commodities, and more recently cryptos.
Because trading and investing is one of the most consistently lucrative ways to generate more money, build your wealth.
The Key?
We mentioned it just now – TIME.
Both Compound Interest and Compound Growth rely on TIME to do their thing.
And also, crucially… you must leave them alone to do their thing!
Never interfere with their incubation!
Let the interest and generated income keep on building, year-after-year.
In the future, you will end up with a money pot over-brimming with wealth!
Don’t believe us?
Too good to be true?
Check it out for yourself.
Einstein really did call it the 8th Wonder of the World!
And you can try it for yourself with this compound interest calculator.
Summary:
The difference between Compound Interest and Compound Growth is slight, but as we hope you can see, can be hugely significant when trading and investing.
Keep playing with the compounding calculator.
If that doesn’t get your heart racing, nothing will!
Here at Investitionsbeherrschung we are thrilled every time one of our community tells us how well they are doing from the trading and investing education they receive from us that has helped them grow their wealth.
You can be one of them.
It all starts with IM Insider.
IM Insider is FREE and gives you access to so many useful guides, videos, books and forums to kickstart your learning about stocks and cryptos and other assets.
