Do you often see this picture sent by friends? Do you know Einstein said that compound interest is the eighth wonder of the world?

Many people know the benefits of compound interest, but they have never really felt it. Today I will show you my real example. (The fund shown in the example is not recommended)

I invested in my first fund, Chinese businessman Shi Sheng, on the recommendation of the bank manager of 20 10. It is difficult to check the records because it takes too long to sell. The longest one I have now is only seven years old.

The Fund began to make fixed investment from June 20 13 to March 20 17.

In other words, the fixed investment took three years and five months. After the fixed investment was stopped in March 20 17, it was not redeemed and kept in it. During this period, it experienced a bull market of 20 15 and a bear market of 20 18. The principal is 24,600 yuan, and the intermediate cash dividend is paid three times and redeemed once, totaling 168. Now the total amount is 3.04 times of the principal.

Up to now, the position gain 1 10.42%, totaling ***7 years. Simply calculate that the annualized rate reaches 15.75438+0%.

But because our fixed investment is not a one-time investment, but a monthly investment, it will also involve the actual rate of return. Calculated by XIRR formula, the actual rate of return is 65,438+08.66%.

The reason for stopping the fixed investment in the bank is that the handling fee of the bank is relatively expensive. At the same time, I started a new round of fixed investment of the same fund on the third-party platform, starting from 2065438+March 2007.

This is the rate of return. The investment time is 3 years and 5 months, the input cost is 75,700 yuan, and the accumulated income is 4702 1. 19 yuan, with an annualized rate of about 17.7%. XIRR did not calculate the actual rate of return.

This is calculated according to the annualization of a single investment. For example, if an investment of 654.38 million yuan is annualized by 5%, the principal in 72/5 = 14.4 years will double, and the principal in 72/ 10 = 7.2 years will double.

The higher the rate of return, the shorter the time to double the principal.

If it is used in products such as funds that calculate the net value every day, the effect of compound interest will be more obvious.

Give a chestnut, and you will understand it when you compare it.

Suppose there is a 10-year bond, and coupon rate is 8%. You can choose the interest payment method, one is to pay once a year, and the other is to pay once a quarter, both of which are calculated by compound interest. Which one would you choose?

If you only roll once a year, the actual annual interest rate is 8%;

If it is rolled four times a year and the quarterly interest rate is 2%(8%/4=2%), the actual annual interest rate becomes 8.24% ((1+2%) 4-1= 8.24%).

Think about it with the knowledge of compound interest. Like the latter method of paying interest once a quarter, the interest of each quarter is added to the principal of the next quarter to snowball. Under the condition that coupon rate remains unchanged, the more times this snowball rolls, the better.

However, in the model of compound interest growth, you are not afraid of small growth rate, but afraid of excessive fluctuations, because these fluctuations will devour your growth.

It took me seven years to verify the magic of compound interest, which is a real and reliable wealth growth model, but the basic homework must be done.

Persistence is important, but choice is more important.