{"owner_profile_page": "/tarmashiran/", "user": "", "article_id": 101, "slug": "what-is-compound-interest-eng", "title": "What is compound interest", "description": "Compound interest is an important term in the financial world. Understanding this principle can help make our money management more efficient. Let's look at examples and calculation methods in this article.", "cover_pic": "https://sat02pap003files.storage.live.com/y4mT48PXpkiH1V4UOvhHwQDgzh0jdzNaekFgC7cdJZGFZJySmJVd7pPg8UB8t0Evxu6i_JQqObtKZULR0ZDb6inMJmh7VXlPMuFwpNOy5tpS_ab3rwx7L_Q8BuA2EX8DiSCyyzhvDd-6kWaJX6Xe9cLq5f3rhNMGTe_BUTzcqOumiPh_JZEs4Esgw5wQZyr2977?width=1920&height=1080&cropmode=none", "content": "

Compound Interest Calculator

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Believe it or not, there are actually many investors around the world who manage to earn higher annual returns than Warren Buffett. Some are even able to make an impressive 60% return per year. But, even after all these decades, Warren Buffett remains the number one investor. The reason why others have not been able to dethrone him is because of the power of compound interest plus the time he has been investing.

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For those who still don't understand what 'compound interest' is, why it exists, and what its benefits are, try reading the information below.

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Compound Interest Calculator click here

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Compound Interest

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Compound interest is an important term in finance. If we understand this principle, we can manage our money more effectively, whether it is paying off debt or investing for profit.

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Compound interest refers to the calculation of interest based on the total initial amount, regardless of whether we have paid some interest or principal. However, interest is calculated daily, monthly, or yearly, depending on where we borrow and under what conditions. It is calculated as a percentage of the outstanding principal. Therefore, the amount of interest accumulates over each passing period.

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For example, if we borrow 10,000 USD and the lender charges an annual interest rate of 15%, let's see how much we would owe after 3 years if we don't make any payments:

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Year 1: Principal 10,000 + Interest 1,500 = total 11,500 USD
Year 2: Principal 11,500 + Interest 1,725 = total 13,225 USD
Year 3: Principal 13,225 + Interest 1,984 = total 15,209 USD

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As you can see, in just 3 years, our debt has increased by 50% from the original amount. If we borrowed more than this, it would be quite troublesome, wouldn't it?

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On the other hand, what if we could invest to earn a fairly stable return instead? What would happen? It would be quite nice, wouldn't it? Let's take a look.

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To benefit from the compound interest rate, we need to invest in something that can generate a steady profit. The return we get from the principal will be calculated from the principal plus profit, compounding over time, just like how we can generate profit.

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For example, if we invest 10,000 USD and earn a profit of 10% per year, let's see how much our money would increase in 3 years if we didn't withdraw any capital:

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Year 1: Principal 10,000 + Profit 1,000 = total 11,000 USD
Year 2: Principal 11,000 + Profit 1,100 = total 12,100 USD
Year 3: Principal 12,100 + Profit 1,210 = total 13,310 USD

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An investment that yields a profit, or an annual interest rate of 10%, in the real world, is usually a medium to high-risk investment. I say it is medium to high risk because people believe that the safest and lowest-risk investment is a 'deposit'. No bank offers us an interest rate as high as 10% per annum for now.

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Compound Interest Calculator click here

", "author": "Tarm Ashiran", "profile_pic_url": "https://ashiranstorage.blob.core.windows.net/ashiran-profile-pic/20211214JCA37G10UK_profile.jpeg", "created_on": " 06-16-2023 @ 02:11", "tags": "compound interest rate,Compound Interest Calculator,compound,interest, forex trading", "likes": 0, "who_like": [], "nickname_who_like": []}