Transfer from "Heaven Brothers"

Each of us came to this market with the same purpose, that is, we hope to make money faster. At this time, you must know a magical word, which is compound interest. The most famous sentence to describe compound interest is actually Einstein's sentence. Compound interest is the most powerful force in the world, even surpassing the atomic bomb. It means that compound interest is like snowballing. No matter how small the cardinal number is, it can become a monster under its great influence.

In terms of investment, compound interest can make a faster growth in wealth with relatively small funds. Brother Dao believes that every novice who has just started investing and trading comes with a good expectation of compound interest. There is no doubt that compound interest is indeed the simplest essence of successful investment.

but this does not mean that compound interest can be easily achieved. I don't want to teach some cliches about compound interest in Daoge course, so in this issue I will explain two problems about compound interest that have been ignored by everyone, two big bugs.

1. compound interest is slower than expected in the early stage, and wealth is mainly created in the later stage.

You must have heard this story. In order to reward the inventor of chess, the Greek king asked him what reward you wanted. At this time, the prime minister gave the king a difficult problem. He said, King, just give me some rice as a reward, and then he took out the chess board he invented.

He said, King, you only need to put one grain of rice in the first grid, two grains of rice in the second grid, four grains of rice in the third grid and eight grains of rice in the fourth grid, and so on, each grid is twice as many as the previous grid until the 64 grids on the chessboard are full of rice. That was the reward for him, and then the king didn't know there was fraud, thinking it was too easy to achieve.

But when his servants took out bags of rice and calculated them, the king found that even taking out all the rice in India and even the whole world could not meet the requirements of the prime minister at all, and this story was also used by later generations to explain the powerful role of R&F.

But there is a problem. Have you found that problems like this ignore a very serious fact? That is, people only pay attention to the climax part in the later period, which is also the part of rapid growth in the later period. People always ignore the fact that the function and power of compound interest is very weak when the base is very small in the early stage.

In reality, many beginners in investment and trading often have very little money at hand at the beginning, but many people fantasize about doubling their money quickly through trading at the beginning, for example, your principal is 1, yuan, and then they think about earning 1, or even 2, yuan quickly. At this time, investment and compound interest are not good. Because even if you double the high rate of return every year, it will take you at least four to five years to complete it, but on the contrary, if you learn a skill and change to a better job or do business, you can achieve your goal faster than compound interest.

Therefore, every newcomer should not hope for compound interest at the beginning. While understanding the power of compound interest, he also needs to understand that compound interest is very slow in the early stage.

Welfare is definitely not the fastest way to earn your first bucket of gold. So what is the best and fastest way to earn the first bucket of gold?

If you are not a rich second generation without any background, the best way is to open up sources of income, that is, to develop more channels to increase income. In the final analysis, you need to keep learning and enhance your ability. Only in this way can we meet better. More opportunities, interception is easier to do than open source is to be as frugal as possible, don't be a moonlight family, and save as much money as possible.

You should know that people like Li Ka-shing or Buffett are very frugal, but that doesn't mean that. We should not invest when we have little money, and on the contrary, we should try to invest as much as possible at this time, because at this stage, the purpose of our investment. Mainly to learn and exercise our trading skills. Because at this time, the cost of losing money is also the least. When you spend the cheapest tuition to learn the most useful knowledge, after you have accumulated enough principal, these previous experiences can make you less mistakes. You don't want to learn to invest until you have money, then it will be too late.

2. whether compound interest can break out in the later stage still has a very important condition. First, the rate of return should be as high as possible, and then the investment period should be long enough. Finally, the most important thing is not to lose money as much as possible.

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At present, there are many investment and wealth management products to choose from, and the general rate of return is below 5%. Investment-oriented, such as stocks and fund insurance wealth management real estate, the yield will be relatively high. But correspondingly, there is also the risk of loss.

We can see the results of this table with different yields under the same principal. In the first decade, the gap was not that big, but after 2 years, the gap between them actually reached hundreds of times. It takes 15 years to double the principal, while 15% takes five years, and 3% takes less than three years. If it is 3 times the 5% yield, it will take 5 years, the 15% yield will take 17 years, and the 3% yield will only take nine years.

So you see, brother, although compound interest is an endless process, when we put human life as one of the variables, the number of times of compound interest is actually quite limited. In a person's short and limited investment career of 3 to 4 years, if you want to compound interest, you will realize the later explosion of wealth. Then the rate of return needs to be as high as possible, otherwise the role of compound interest is very small. And at the same time, you can't lose money, because any loss in one year will ruin the achievements of the previous years.

For example, Buffett's Berkshire Company suffered losses only in 21 and 28 during the 49 years from 1965 to 213, while the average rate of return in other years reached 2%, but its principal has increased by 6,9 times in 49 years. And all this stems from his stable and relatively high rate of return every year.

paradoxically, higher rate of return means higher risk, and how to balance the relationship between return and risk. In fact, if many brothers do bad things, some people say that if they want to reduce risks, they must lower their expectations of returns. For example, they will say that if you don't want to lose money, don't invest in stocks and put your money in the bank honestly.

However, this statement is not accurate. To reduce the risk, the best way is not to reduce the expectation of income, but to learn, because it is a risk for those who don't have these basic knowledge, but it is an opportunity for those who already have this knowledge.

So learning can reduce, but it can't eliminate risks. What learning can reduce is those risks that people can control, but for those uncontrollable risks, it is not to compete with them, but to avoid them.

what I want to say at the end of the song is compound interest, which is not as simple as the chicken soup story. Besides making you understand the power of compound interest, you should also make you understand the difficulty of compound interest. If you want to get it, you must go through eighty-one difficult. Because the development of compound interest is very fast in the later period, but the growth rate in the early period is very long. Secondly, if you want the power of compound interest to explode, you must have the highest possible rate of return, the longest possible time and avoid losses as much as possible.

So to do this, you must give full play to the three best qualities of human nature: diligence, wisdom and patience. It's really like the reward given by the king. Compound interest is really the highest reward for the best people. But to be those excellent people, you need to keep learning, making progress and improving, which is why Brother Dao is willing to share these courses, hoping to hear that all brothers can learn and become better themselves.

Well, that's the end of the course for this day. Brothers can click on the next course to continue their study.