Sunday, January 19, 2020

Compound Interest makes a HUGH difference

    This post is a continuation of the $50 a month stock challenge I started October 14, 2019.  Click on, "No Commission Stock Trades", on the right side of the page to read from the start.

      I started this blog series to show with minimal time, work, and MONEY anyone can build a small account into something they can be proud of.

      I explained that investing just $50 a month may not seem like it is worth the trouble, it is the accumulation of deposits and profits that build wealth.

     If you have been following along, you have seen our steady percentage gains each month.  We are not about taking unnecessary risks (inherently some risk is involved in the stock market) but instead mostly investing in established stable companies.

     If you check out my 3 month update , you will find I have a profit of 15.64% . That is "simple interest" and the gains are even higher using "compound interest" (reinvesting our profits each month).

    "Simple Interest" just means reinvesting your principle. Lets use $1000 just as an arbitrary number (percentages compare any amount) for our account without adding any more to it.

     $1000 (deposit) x 15.64% = $1156.40 account total in three months

     "Compound Interest" using that same $1000 but reinvesting our profits. In October 7.22%, November 3.21%, and December 5.21% = 15.64%.

     $1000 x 7.22% = $1072.20

     $1072.20 x 3.31% = $1106.61

     $1106.61 x 5.21% = $1164.27 compounded

     $1164.27 - $1156.40 = $7.86 additional profit by reinvesting our profits each month.

     That $7.86 additional profit is a gain of .0786% gain over our 15.64%. (for those decimal challenged), that is over 3/4 of 1 percent in just 3 months.

     BOTTOM LINE, you can do THIS.

Disclaimer, I am not a professional.

   

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