Can compound interest of 10% beat simple interest of 50%?

Analysis: What is the difference between simple interest and compound interest? After understanding this, you can also become Warren Buffett. In the world of investment, what everyone is constantly pursuing is high returns and high profits. However, tools that can create higher profits are accompanied by higher investment risks, so you must first understand the difference between simple interest and compound interest before investing.

Suppose the principal is 1 million

If you invest in an instrument with a simple interest rate of 10%, the result after 10 years will be 2 million

Invest in an instrument with a compound interest rate of 10% , the result after 10 years is 2.56 million

That’s not enough to feel, right!

Investing in a tool with a simple interest rate of 10%, the result after 20 years is 3 million

Investing in a tool with a compound interest rate of 10%, the result after 20 years is 6.72 million

What’s even more amazing~

Investing in a tool with a simple interest rate of 10%, the result is 30 The result after one year is 4 million

If you invest in a tool with a compound interest rate of 10%, the result after 30 years is 17.44 million

Many people have been in the stock market for decades, and those who can win in the end There are only a few heroes

Every time I listen to the experiences of many elders, I rarely hear of those who make big money, and those who make even money without losing money are considered a minority. Most of them end up losing money, but why do people still invest one after another? Looking back on the past People who have invested in stocks, real estate, funds, futures, warrants, foreign exchange, and gold for 20 years. I can only make a lot of money by investing in real estate, and I have almost doubled my investment in the past 10 years, and I can make money by buying whatever I want.

But few people have heard that people who play stocks, funds, futures, warrants, foreign exchange, and gold can make big money, except for the characters in Today's Weekly. But what is the charm that allows many people to continue to stick to the stock market. Because human nature is greedy and lazy. What is greed? Don’t they know that you can make a lot of money by investing in real estate? No, they know, but real estate only earns 10% a year, and hey, stocks can earn 7% in one day. What is laziness? Don’t they know that you can make a lot of money by investing in real estate? No~ they know, but stocks can be played for tens of thousands of dollars, and real estate can easily cost millions, so many people would rather play stocks than save a pot of gold to invest in real estate. But the fact is that many people have lost more than a million in the stock market. Moreover, the stock market can be entered by just learning a little. Real estate is so troublesome. You have to go out to look at houses, interact with real estate agents, and learn a lot. Real estate knowledge is too troublesome. Although you can make a lot of money, forget it. It is easier to continue playing stocks. This is the mentality of most investors, so we often discuss it to the end. Technology and methods are not the key to profit. Human nature is the most difficult thing to overcome. Why are there still people who can make big money in the stock market? Their technical analysis is really better. Is it strong?

The three major factors for investment profits: principal X return X time

Most people focus on returns and constantly pursue high % profits , but forgot an equally important factor, time

Assume the principal is 1 million.

After 10 years, the difference between simple interest of 10% and compound interest of 10% is 560,000.

After 20 years, the difference between simple interest of 10% and compound interest of 10% is 3.72 million.

After 30 years, the difference between simple interest of 10% and compound interest of 10% is 13.44 million.

So why did Einstein say that compound interest is more powerful than the atomic bomb, but many people have no feeling about compound interest, because most people only want to get high profits in a short period of time, twice a year. One year is too long, let alone 20 or 30 years. It is best to hit the daily limit and make 100% profit in one month.

The principal is 1 million, and the compound interest is 10%. In 30 years, it will accumulate to 17.44 million.

But did you know? If you look at simple interest, the principal is 1 million, the simple interest is 54.8%, and after 30 years, it will accumulate to 17.44 million

In other words, compound interest 10%, the result after 30 years is equal to the simple interest of 54.8%, the result after 30 years.

Nowadays, the person who has brought the compound interest theory to its fullest is the well-known stock god Warren Buffett. His snowball theory is to find a company worth investing in, hold it for a long time, and the profits will snowball. The bigger the roll, does Buffett get rich by rushing in and out of the stock market every day? It seems not!

A common problem among modern people is that they usually dismiss the tools of 5% and 6% compound interest, but As everyone knows, usually 5% or 6% compound interest tools can often accumulate huge wealth after 30 or 40 years. On the contrary, if they rush in and out in the short term every day, most people will still have nothing after 30 years.

Here I am not telling you not to play stocks, but I am telling you not to be fooled by stocks.

The key point is asset allocation. Part of the money should be invested in stocks and part of the money should be invested in tools with compound interest effects. Even if all the money in stocks is lost in the future, there will still be a considerable amount of assets for you to retire.