You’ve probably heard of the term compound interest (but maybe you haven’t), so in this article we’ll explore what compound interest is and how it can help multiply your money. It should be mentioned at once that the most important thing with compound interest is patience and long-term thinking.
To make it more interesting for you to read further, let’s look at one example with the following parameters: You are investing 2000 euros today and topping this investment account with 200 euros every month – your total investment would be 4400 euros in the first year and then 2400 on the next ones. Let’s say you manage to earn 50% of your investment every year and the investment is reinvested every month. And so for 10 years! So, the total own investment would be 44,000 euros. I wonder how many euros you would have in this account in 10 years?
According to the calculator available on the investor.com website, in 10 years we would have 907,128 euros and 83 cents !!!
Not bad at all I think! Now maybe you are wondering where to invest money and get 50% a year? And with the opportunity to reinvest your earnings every month?
It seems to me that I have found a place where this is possible.
The eToro social investment platform offers all of the above to implement this investment plan and earn almost a million in 10 years!
The Copy People product by eToro offers the opportunity to invest in the portfolios of professional traders without any additional fees. Many of these people’s portfolios earn 50-100% of their investments each year year. And you can add extra funds to Copy Traders portfolio and it will be automatically invested in stocks, crypto or whatever the user is trading.
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How does that sound to you? From my experience so far on the eToro trading platform, it seems to me quite possible!
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More on compound interest and how it can help your money grow
Compound interest is considered a smart investment strategy. The compound interest formula is applied when interest is added to the deposit after the same time periods (daily, monthly, etc.) and this interest is added to the deposit, i.e. the calculation of compound interest involves interest capitalization (interest addition).
The amount of the deposit at the end of the term, using compound interest, is calculated according to the following formula:
The formula for compound interest, including principal sum, is:
A = P (1 + r/n) (nt)
- A = the future value of the investment/loan, including interest
- P = the principal investment amount (the initial deposit or loan amount)
- r = the annual interest rate (decimal)
- n = the number of times that interest is compounded per unit t
- t = the time the money is invested or borrowed for
What makes compound interest so profitable?
Compounding occurs when interest is paid repeatedly (monthly or annually). In the first two years of investing, the return on this interest is not so significant, but the numbers start to get serious when the interest is reinvested over longer periods of time. So we can talk about the following aspects:
Frequency of reinvestment: The more often money is reinvested – for example, daily or monthly – the more dramatic the results.
Investment period: The significant results of compound interest are more noticeable in longer periods. Each time money is reinvested, you invest more than the previous time and the new interest will be calculated on that amount.
Interest Rate: Higher interest rates mean that the investment account will grow faster. Compound interest may be more profitable than higher simple interest. In long periods of time, an account with compound interest but a lower interest rate can provide a better return on investment than an account with a higher interest rate using a simple calculation.
Deposits: Adding new funds to your investment account is one of the best things you can do with your free funds. Make your money work!
Initial investment: The amount of money you start investing in does not affect compound interest. Whether you start with € 100 or € 1 million, compound interest works the same way. Revenue seems to be higher if you start with a higher initial investment. When planning your future, it is best to focus on interest and time: what interest will you earn and for how long? The money earned will only be the result of your interest rate and investment time.
How can you earn compound interest?
As I said before, I think the best place to invest money with compound interest is the eToro social trading platform. On this platform you will be able to reinvest your interest at least every day!