I feel a little sad to see this question, because in my opinion, it is a little simple. But when I learned that this was a question from a novice investor, I immediately wanted to take it out and give a good answer. Because, I know, no one will ever attend the meeting, and curiosity is the hardest thing. As long as you keep learning with the teachers of Haobu Business School, I believe you will become more and more professional investors and make your wallet work for you.
Okay, let's get down to business. Today, let's talk about what compound interest is and how to enjoy compound interest and increase value.
1. What is compound interest?
Compound interest means that after each interest period, the interest generated will be added to the principal to calculate the interest of the next period. Also known as "rolling interest". It is different from simple interest with only principal and interest.
For example, if the principal is 65,438+00,000 yuan, the annual return on investment is 5% and the investment period is 65,438+00 years, the sum of principal and interest calculated by compound interest is 65,438+00,000 * (65,438+0+5%) 65,438. The final value is:10000 * (1+5% *10) =15000.
Seeing this, you may still feel that compound interest is not very strong (the principal and interest are only more than 1289 yuan). But please read on: what will happen if the investment period is extended to 20 years, 30 years and 40 years respectively?
As time goes by, the gap between compound interest and simple interest is getting bigger and bigger! The current 10000 yuan, according to the compound interest calculation, the total principal and interest after 40 years actually reached 70000 yuan! According to the simple interest calculation, it is only 30 thousand yuan. This is the power of compound interest!
Smart you may find that the advantages of compound interest are gradually manifested, and the longer the time, the more amazing the benefits. Yes, but besides time, there are two indispensable factors to exert the compound interest effect. Namely: principal, sustainable positive rate of return. Without the headmaster, everything is impossible; Without a sustainable positive rate of return, it is even more impossible to accumulate wealth.
Knowing what compound interest is, let's talk about fund dividends. Fund dividend means that the fund distributes part of the income to investors in the form of "cash" or "new shares", and the dividend methods correspond to "cash dividend" and "dividend reinvestment" respectively. Note that "dividend reinvestment" here is actually a form of compound interest, which is equivalent to reinvesting the money earned by the fund.
Second, how to enjoy compound interest appreciation for fixed investment?
Fixed investment can achieve more stable and sustainable positive returns in the long run. With this, coupled with the increase in principal and time, it is not difficult to realize the millionaire's plan through fixed investment.
But we must remember to reinvest the profit-taking funds and start the next round of fixed investment! This is the most important step to accumulate wealth by fixed investment, because only by reinvesting the earned money can we play a real compound interest effect and realize wealth appreciation.
How to operate specifically? There are two ways:
Method 1: I still invest in the original fund, but except for the deduction amount of normal monthly investment, the funds redeemed in the last round of investment, including principal and income, are added to the fund in 24 months. Profit after reaching the target income next time, and the profit-making funds will roll into the next round of fixed investment. Time and time again, "new money" and "old money" roll together and invest for a long time to get the best compound interest effect.
Knowing the method of 1, what is the second method? Want to know more about how to enjoy compound interest appreciation for fixed investment, as well as detailed case descriptions, you can pay attention to the micro-signal of "Good Buy Business School", enter the bottom menu-Audio+Graphic Full Edition Good Buy Financial Management, enter the system learning, and leave a message for consultation at the back of the course at any time.