Compound interest

The power of compound interest in financial markets


What is to invest?

It is a common belief or story that saving is a way to invest for the future, which is not entirely true. While saving is the starting point for building up disposable income to explore various investment options, it is not in itself an investment. When you consider the time value of money, you’ll quickly realize that saving isn’t as good or lucrative for your future as you might initially think. Simply storing money and not using it in an interest-bearing mechanism means that it will have even less value in the future due to factors such as inflation and the cost of debt. higher and higher life.

This is why industry insiders and financial advisers often defend investing, as it means that your funds will “grow” and have the same value, hopefully more, at a future date when you decide to invest. ‘use. While investing locally is commendable, some may argue that you should explore international markets and try to invest in foreign currency trading, for example, to really capitalize on the strength of another currency as opposed to your local currency. , which may be declining or worse. than it has been in recent years.

Understanding Compound Interest

You may be wondering how and why a certain amount of money may be worth more in the future, and this is where the concept of compound interest comes in. then applies to the highest principal amount and leads to exponential growth in the amount. The interest generated can then be offset by inflation and other economic crises and be more beneficial than simply saving money with no prospect of growth over a period of time.

Invest early

That being said, that is why it is advisable to start investing early. The earlier you start investing, the more likely you are to accumulate compound interest. Also, a generalization is that when you are younger you have very little responsibility and can afford to take higher risks and explore various investment options. Since the investment comes with a certain level of risk, the returns can also be quite large.

When you consider forex and stock trading, for example, some people think you get better over time and the practice is perfect. Therefore, the earlier you start practicing, the more successful you will be later in life. Breaking through obstacles, incurring losses, getting used to market conditions and turbulence, as well as the ability to bounce back from potentially major financial setbacks are just a few of the things time saves you.

With the convenience of technology and the Internet, many believe that there has never been a better time than now to start investing. In addition to the workshops held on trading and the resources offered by brokers, potential investors are spoiled for choice to expand their knowledge and hone in on existing investment options, market conditions and even success stories. which can be used as a guide on the steps to take to achieve financial freedom, whatever that may be for you.