Compound Interest Explained in One Minute
A lot of savers underestimate the power of reinvesting, they don't understand just how much of a difference compound interest makes.
Can you simply spend the interest on awesome products/services without reinvesting? Sure but there's a price to pay. The effects of compounding seem underwhelming if you only look at them over a cycle or two but in the long run, the difference between the portfolio of someone who leverages the power of compound interest and someone who doesn't is huge.
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This is the type of stuff they need to teach kids in highschool.... Same as budgeting....
@OneMinuteEconomics
2 жыл бұрын
Appreciate the kind words :)
@crinzboy9136
Жыл бұрын
they do
@MaveTheRedd
Жыл бұрын
@@crinzboy9136 im in middle school nd im learning this for exams
@billionaeris1183
7 ай бұрын
They won't because they need mindless worker drones running the counters and machines, not everyone can be rich but if you figure out what's going on and think smart no reason why you can't join the big leagues but yeah the world wouldn't work the way it does today if everyone was savvy about finance.
@EmmiBlox
5 ай бұрын
I'm in highschool learning this rn lol
Congratulations John, you played yourself.
@cottonchannelpop6407
4 жыл бұрын
Alex Sanchez man this is fast make it 5min
@munny_1206
Жыл бұрын
Facts!
@lwe_12
8 ай бұрын
Jhone invested in a high paying company in which he own that he sales named bran clothes that are very much over prices for a faction of his money he saved Lesa spen it all on collage lone
@KamoheloRamone
7 ай бұрын
John ain't here for a long time but a good time
@suain.8101
Ай бұрын
@@lwe_12😂😂😂 accurate John would’ve learnt
Straight to the point and makes sense. Thanks bro.
@OneMinuteEconomics
3 жыл бұрын
You're more than welcome Thomas, really glad you found the video useful :)
Short and succinct, I love this . Thank you
this needs quite a lot of patience
bro my teacher confused me in this topic but thanks to you i understood compound interest so easily
One Minute Economics needs your help! Please give me a minute (heh) of your time by watching the following video if you find the channel useful, literally anyone can help (either financially or by spreading the word about my work): kzread.info/dash/bejne/m6NklsWkoZS-YbA.html
“This is how wealth is made”
@JonathanWilliam-is6wd
3 ай бұрын
The first step to attaining wealth is figuring out your goaIs and risk toIerance - either on your own or with the heIp of a financiaI pIanner, and foIIowing through with an inteIIigent pIan, you wiII gain financiaI growth over the years and enjoy the benefits of managing your money.
@JonathanWilliam-is6wd
3 ай бұрын
I am fortunate I made productive decisions that changed my finances (gathered over 1M in 2years) through my financiaI planner. Got my 2nd house in Feb, and hoping to retire soon. Give this a try and attain good-returns.
@JonathanWilliam-is6wd
3 ай бұрын
For more lnfo Financial -Planner Rebecca Mart-Watson (in fuII)
Whew! Super simple explanation! I love this!
If you liked this video, I think you'll love my personal finance book (Wealth Management 2.0) that has been written specifically for today's ultra-complex investment landscape and is available over at: 1) Amazon: www.amazon.com/Wealth-Management-2-0-Financial-Professionals-ebook/dp/B01I1WA2BK 2) Barnes & Noble: www.barnesandnoble.com/w/wealth-management-20-andrei-polgar/1124435282?ean=2940153328942 3) Apple Books: books.apple.com/us/book/wealth-management-2-0/id1146539158?mt=11 4) Kobo: www.kobo.com/ro/en/ebook/wealth-management-2-0
Well that's was better explained than other videos.... Thanks man...
The problem is that with inflation , money just decreases in value which is why investing might be better
@Dr.Huzeyfe
22 күн бұрын
Investing also decreases in value then
@spyroskentroskentros5317
22 күн бұрын
@@Dr.Huzeyfe Oh right😂
@bharath7730
11 күн бұрын
@@Dr.Huzeyfe what about gold and silver bro? It's limited on earth, so it is good for long-term investment
@Dr.Huzeyfe
11 күн бұрын
@@bharath7730 thats the best option right now
@BlvdRoad
3 күн бұрын
@bharath7730 no, you're investing in another means of exchange that's archaic. It's only practical use is in electronics and energy, which might be fine for that
Very very clear
Great video!
thank you, this video has given me insights and clarity. I was struggling to understand all em books. Appreciated
@OneMinuteEconomics
11 ай бұрын
Glad it helped! :)
Brilliantly explained
@OneMinuteEconomics
7 ай бұрын
Thank you :)
If only banks actually give 10% interest rates for savings
@OneMinuteEconomics
Жыл бұрын
Be careful what you wish for :D
This video is AMAZING!!!!
@OneMinuteEconomics
4 жыл бұрын
Thank you so much!!! :)
On point wow, some videos were complicated.
@OneMinuteEconomics
2 жыл бұрын
Glad you liked this one Miguel :)
I really like this video because it easy to be understand
@OneMinuteEconomics
4 жыл бұрын
Awesome, glad you find it useful! :)
Your videos are awesome, dude! What program do you use to make the animations? :)
@subhendudas8564
2 жыл бұрын
Vyond
way too fast for my brain. i wouldn't mind if the vid was 5 mins. I should be able to understand
@pamellarobinson9410
4 жыл бұрын
Swear🙁
@justinpeaden2001
4 жыл бұрын
Not trying to be mean but try slowing it down if you have to
Thank you
@OneMinuteEconomics
4 жыл бұрын
You are more than welcome Harsh :)
nothing caught my little brain but I decreased the playback speed LOL.....😅😅😅❤❤❤❤ WELL EXPLAINED... THANK YOU!!!
@OneMinuteEconomics
3 жыл бұрын
I apologize for sometimes going overboard speed-wise, KZread's playback speed reduction feature can indeed be a blessing sometimes :)
Thank you!
@OneMinuteEconomics
4 жыл бұрын
You're more than welcome Ankit :)
Yes, can you explain compounded daily and compounded monthly difference?
How would interest be compounded daily though? In the instance of a CD?
Good one....!! 👍👍
@OneMinuteEconomics
4 жыл бұрын
Glad you found the video useful Isha!
It would have been good to compare John to simple interest
Now to find someone who gives such a good interest rate 🤨😜
@OneMinuteEconomics
3 жыл бұрын
Heh, good luck with that! :D
@utubelittlebagofeverything5844
3 жыл бұрын
For the past 50 years, the S&P 500 returns over 8% per year on average. QQQ etf almost 11% since 2020. Apple & Microsoft stocks over 20% per year for 20 years. If you look, you will find plenty of opportunities in the stock market.
John lives in the moment
@OneMinuteEconomics
6 ай бұрын
That can get quite expensive :P
I finally understand this 😭
@OneMinuteEconomics
Жыл бұрын
Glad to hear (well, read) it :)
This video is good but lacks the most important part: where are you going to find a bank that offers you 10% of compound interest a year??
@OneMinuteEconomics
Жыл бұрын
Well, at least we're closer now than when the video was published :)
@jacklockwood4201
3 ай бұрын
The S&P 500 Averages about a 10% return each year
John was smart
Danny brought me here iykyk
Simple ❤
Lisa was 100 after 30 years 😂
@MatteoFitness
4 ай бұрын
So?
This is fast dude make it more than a hell of 1 min
@OneMinuteEconomics
4 жыл бұрын
Some of my videos are a bit too fast-paced, been working on it and getting better... I hope :)
Perhaps you should look at the inflation in 30 years
I am interested because even interest earns interest
@OneMinuteEconomics
10 ай бұрын
I see what you did there :P
john bad lisa big brain
@OneMinuteEconomics
2 жыл бұрын
:D
Everyone at work complaine they are broke woth expensive clothes and their me just setting on money 😊
Its 1:27
The money may not worth the same in the future. Enjoy now and be careful with investment.
Its jus depend whether u wana to withdraw and buy a car or iphone etc
@OneMinuteEconomics
3 жыл бұрын
Sure, deferred consumption vs. instant gratification :)
☝️🧐 Impossible! Lisa would have spent it all on shoes.
Need a video of how or where distributions from 401k come from. For example... Day 1 of retirement I withdrawal $10,000. My 401k consists of 20% contributions and 80% gains. Does it start with my contributions first until all of my contributions are gone? Or will $2,000 be taken from contributions and $8,000 be taken from gainsbto balance the 401k account?
@garhong9125
Ай бұрын
If you're still wondering this: Your 401k is essentially a stock portfolio. When you withdraw 10k, what you are doing is selling enough shares of stock to get 10k. Your gains are basically the total gains of the shares you've sold to get 10k.
@nateitscake88
Ай бұрын
@garhong9125 I got my answer from my Fidelity Benefits Coordinator. The way they do it is by equally distributing you contributions and gains. For Example: Entire portfolio balance consists of 20% contributions and 80% gains. So if you withdraw $10,000... $2,000 will be come contributions sold and $8,000 will come from gains sold. This way your entire portfolio will stay balanced.
Look like John is smarter if he use the interest eared to invest in something better because he not loosing as much as Lisa due to higher inflation rate.
which software is used for the animation?
@OneMinuteEconomics
3 жыл бұрын
Hi, Vyond is used for the video animation :)
@akshay8675
3 жыл бұрын
@@OneMinuteEconomics thanks a lot
Long story short: save ur money in CI investment and try to live a long enough time.
Yes now add 1000$ every year to that investment and its gona be way more
So basically i would just make a one time investment and leave it alone while compound interest does its thing?
@OneMinuteEconomics
Жыл бұрын
Depends on the nature of the investment and whether or not compounding is possible, but basically yes :)
But you didn't explain how to work out the last part
It's risky to hold money in a bank for 30 years let alone 10 sure if the economy hasn't crashed and the bank gone bust it's happy days but that's if, big risk tbh. At least first guy will have gotten something out of it
Can you with 100% confidence confirm that she can buy all those stuffs that John bought for RS 3000 at the end of 30 years?
@OneMinuteEconomics
Жыл бұрын
100% confidence in economics don't go hand in hand unfortunately :)
@davehughesfarm7983
Жыл бұрын
Probably a coke head... LOLOLOLOLOL
@rakeshmaurya4738
9 ай бұрын
Those three thousand dollars of John are worth more than the old lady
So basically, hold your money into the bank for interest? ?
@OneMinuteEconomics
3 жыл бұрын
Well, I'd say that ship has sailed haha, even if it was usually never much of a ship. The bank example represents the most straightforward choice for an explanation, but the main idea is doing *something* to generate a return that can be re-invested :)
Are banks the only places that offer a compound interest?
@OneMinuteEconomics
5 ай бұрын
Nope
@JuiceBox22
5 ай бұрын
@@OneMinuteEconomics where else?
But my question is where? Mutual funds? CDs? Money market? Because the last two will not be more than 4%.
@OneMinuteEconomics
11 ай бұрын
Highly context-dependent. FWIW, it's at least easier to achieve in the current interest rate environment than back when this video was published :)
How so they earn millions from 30 000 in 50years then?
Plot twist: the woman died at year 15 without taking anything
wow
@OneMinuteEconomics
Жыл бұрын
:)
Delay gratification…
…and that's how Lisa divorced john.
@OneMinuteEconomics
2 жыл бұрын
Ouch!
Ya but John bought new shoes too look good for his new wife which divorced him after she found out he only made $100 a year & now after settlements john has no shoes, no woman & now house. Take that Lisa!
I have 20k saved up as a 21 yr old what should I do?
@OneMinuteEconomics
3 ай бұрын
At your age, I don't think anything can come close in terms of potential returns to plain old investing in yourself... investing in education, skills, anything that helps you become better professionally. Also, please do not take your physical health for granted, any money spent making progress in that direction also represents a wise investment!
all the words went over my head didn't understand a word is it the video or is my brain not working
@OneMinuteEconomics
2 жыл бұрын
Neither haha, in some cases I always recommend watching a video a few times. Compound interest, especially if we are to crunch some numbers, isn't the easiest topic to tackle :)
Get rekt, John
30 years for only 17 thousand dollars
Just so people say this comments section is irrelivant, here I go: Logan Paul is a Flat Earther.
I still don't understand
@OneMinuteEconomics
3 жыл бұрын
Feel free to ask whichever question(s) you may have and I'll do my best to help, or perhaps another member of the community will beat me to it :)
Yeah, but John had more fun over those 30 years
It's sad how poor people are shamed for using welfare but rich people aren't shamed for doing this
@OneMinuteEconomics
3 жыл бұрын
Indeed, I've published a video about just that 8 months ago: kzread.info/dash/bejne/enWFmJKtY7rLfso.html
@RageAZA
2 жыл бұрын
why is it shameful?
This is for math.
Lesson: Be like Lisa
@OneMinuteEconomics
3 жыл бұрын
:)
No bank pays 10%
@OneMinuteEconomics
5 жыл бұрын
Some of our more mature community members would beg to differ :)
@ekamsandhu134
4 жыл бұрын
@@OneMinuteEconomics S&P500 Vanguard ETF :)
Banks suck I'll stick to staking with crypto
@OneMinuteEconomics
8 ай бұрын
Plenty of room for both dimensions in our lives IMO
30 years lol
@OneMinuteEconomics
4 жыл бұрын
:D
oof john wasted his money
Literally makes no sense
@OneMinuteEconomics
5 жыл бұрын
If there's anything I can clarify for you, let me know :)
@roflswamp6
5 жыл бұрын
@@OneMinuteEconomics so basically is this referring to a bank? Do I need to use percentages ? How does the money increase ? Sorry for having terrible math skills I appreciate your time and information and would like to clarify that your video is not a bad one I am just particularly bad at picking up on math
@OneMinuteEconomics
5 жыл бұрын
It refers to anything at all that gives you a return, bank deposits included. The power of compound interest becomes obvious once/if you keep re-investing. That's the key to the entire-thing, re-investing everything. For example, let's assume you want to make money by lending cash to people. You start with $1,000 and charge 10% per month: 1) You lend $1,000 to Jane and after a month, she gives you $1,100 (your $1,000 plus 10%, so plus $100) 2) You now have $1,100 that you lend to John. After a month, he gives you $1,210 (your $1,100 plus 10%, so plus $110) 3) You now have $1,210 that you lend to Mike. After a month, he gives you $1,331 (your $1,210 plus 10%, so plus $121) ... rinse and repeat. The main takeaway here is that those who are disciplined enough to re-invest can be rewarded very, very generously by the market. While it may not be apparent at first, there's a HUGE difference between: A) lending $1,000 each month and receiving 10% ($100) which you use for day-to-day expenses... in other words, spending the 10% each month and re-lending the initial $1,000 and B) lending $1,000 each month, receiving 10% and re-investing... in other words, re-lending not just the initial amount but also the 10% you receive Develop the habit of doing this, be disciplined over a period of many years and the results are life-altering :)
@misrob7614
5 жыл бұрын
One Minute Economics thank you for explaining bc I was totally lost
@MrsGG-id1os
Жыл бұрын
Thank you for clarifying
can you plz talk slower
@OneMinuteEconomics
4 жыл бұрын
I get carried away in some videos, sorry about that :(
worst explaination, ur being to persuasive
@OneMinuteEconomics
4 жыл бұрын
Sorry you didn't like the video, thanks for dropping by though and I'll be sure to take your speed-related feedback into consideration as well... I sometimes go overboard speed-wise, fair point, finding the right balance between format/speed and depth is always challenging.
If P∝E, the standard cagr formula, (1+g)ⁿ, is correct and applicable. If P/E ∝ ROIC, then the standard cagr formula, (1+g) is wrong, not applicable. For P/E ∝ ROIC: The compounding multiple = [ (1+Gnet_income)²÷ (1+Ginvested_capital) ]ⁿ You can verify this formula in the NVR over its 26 year compounding from USD 22 to USD 6,500.