What Is Compound Interest? | Investopedia
What is compound interest? Compound interest is often called one of the most powerful concepts in finance. Find out what it is and how it can work for you.
For more content related to Compound Interest, check out:
Understanding The Time Value Of Money
www.investopedia.com/articles/...
Overcoming Compounding's Dark Side
www.investopedia.com/articles/...
Пікірлер: 704
Nobody can become financially successful over night. They put in background work but we tend to see the finished part. Fear is a dangerous component, hindering us from taking bold steps we need in other to reach our goals.
@bartoszdobroslaw9774
2 жыл бұрын
I think it's not always about fear, Sometimes realistic factors discourage people from reaching their goals in life. For instance, I've tried investing in the stock market several times but always got discouraged by fluctuations of stock value.
@bartoszdobroslaw9774
2 жыл бұрын
@maria sandra Oh that sounds good but how do i reach out to Tamara diane hagan ?
@bartoszdobroslaw9774
2 жыл бұрын
@maria sandra OKay i just found her website very impressive and dropped a message for her.,. i hope she reply me.
@bishop51807
2 жыл бұрын
So is greed, look out for the two. Con men prey on both fear and greed.
@staffsaber534
4 ай бұрын
Dudes after they put a suit on for the first time be like
kinda helped but i'm still gonna fail this test tomorrow
@tarik20
8 жыл бұрын
+Jacob Bourke Did you fail? What class was it for?
@jacobbourke9591
8 жыл бұрын
I still failed the test but oh well, simple and compound interest it was on
@eddy0603
7 жыл бұрын
Grades are just formality, Knowledge is the results of those sacrifices and the one that will be used in the future. Did you failed ? Yes. But, did you understood the concept ?
@rivermay109
6 жыл бұрын
Jacob Bourke you're lucky that you had this resource, I didn't when I went to school so... but you have to have basic understanding for it to make any sense.
@oso-goodcinema848
6 жыл бұрын
I'm watching this math video for science... BECAUSE THAT MAKES SENSE
what bank has 5% interest on their savings? mines like freaking .004% quarterly
@relic1398
8 жыл бұрын
+jaysplace01 Banks used to, 30 years ago. Those days are over.
@ChrisWithACam
8 жыл бұрын
That's why you don't use banks for investing.
@jaysplace01
8 жыл бұрын
ChrisWithACam i don't its just interesting to hear banks had 5% interest at one point
@statisticsisbetter17
8 жыл бұрын
That's why you don't use banks for investing ahha.That's the worst.
@rafichaudhury8925
7 жыл бұрын
Banks aren't going to provide 5%. Investing in diversified index funds are more likely to provide something around that amount. However, funds have up and down years depending on how the markets perform. So at best you can estimate an average annual rate of return, say 5%. That could mean that in one year, the rate of return is -5%, and the year after, it's +15%. On average, that would be 5% over the two years.
understanding both the power of compound return and the difficultly of getting it is the heart and soul of understanding a lot of things - Charles T Munger
sooo.... in english, its reinvesting your profits from investing
I find myself at a crossroads, uncertain whether to liquidate my $250,000 stock portfolio. I'm seeking advice on the best strategy to capitalize on this current bear market.
@sherryie2
Жыл бұрын
Investing in stocks can be a wise decision, especially if you have a reliable trading system that can lead you to fruitful days of success.
@rickertcoles
Жыл бұрын
@@sherryie2 Factos!! Since the market became extremely volatile and pressure increased (I should be retiring in 17 months), I took the decision to work closely with a financial advisor. It has already been 9 months and counting, and I have made approximately 600K net from all of my holdings.
@laportafrank
Жыл бұрын
@@rickertcoles That's impressive! I could really use the expertise of this advisor.
@rickertcoles
Жыл бұрын
@@laportafrank credits to NICOLE DESIREE SIMON, one of the best portfolio manager;s out there. she;s well known, you should look her up
@laportafrank
Жыл бұрын
@@rickertcoles Thanks for the info, i found her website and sent a message hopefully she replies soon.
I think that was the best explanation of compound interest out of all the other vids I watched
Investopedia spitting the straight-up truth!!!
@seandafny
9 жыл бұрын
lol
@LemonChieff
5 жыл бұрын
Makes the maths a lesser pain in the ass
No a bank will not offer 5% but a mutual fund in the stock market will offer 5% - 10% over time invested monthly. Basically 5-10 cents for every dollar you invest. Whereas bank offer less than 1% 0r less than a penny for every dollar you deposit. Banks can offer 2% in money market accounts but require a "small" $1,000 deposit lol
@loftwinglife8843
3 жыл бұрын
Meanwhile I have 1k in my savings account and my bank only gives me 11 cents per 3 months. *sad times*
@achilleroux8276
3 жыл бұрын
@@loftwinglife8843 oof
Good video and nice animations. Does a good job of explaining compound interest. Reading through the comments I think it's good to note that the interest rate is not the point here. Its more important to understand the principal. There are other videos on where to invest in.
this explained the subject 10 times better than any teacher/textbook ever has
Superb and very clear video. Thank you for such great explanation. Keep educating 🙏🏼
I understand it now. Thank you for this simple educating video
very nice video , short , simple and easy to understand ... thank you so much
thnx really helped my brain I see all these epic videos on the side of my screen but I gotta stay focused on the video and yours is snappy colourful and got to the point
I truly came for why is compound interest concept is used for formulation of formula of calculating rates of depreciation in written down value method ...(accounting) thx a lot beautiful explanation
take a shot everytime this guy says intrest
@buttmunch397
4 жыл бұрын
You’d be drunk in 40 seconds
@pigbenis2812
3 жыл бұрын
@@buttmunch397 he already is. That’s why he can’t spell interest.
@lofiafterdark9882
3 жыл бұрын
@@pigbenis2812 😂😂😂😂😂😂😂😂
So how do I apply this ? Every month I put money in to index fund and at the end of the year invest will be received or grow and I just leave it there ?
Thanks for the video! Great quality!
Great video thank you so much. By the way, which software was used to create those cool drawings on your presentation while the video was playing. That was great .
This is very true so is the possibility of finding a vehicle that offers 5% interest or more to offset inflation. I personally own 2 separate accounts that have this formula working for me. 1 has a 15% cap but a .75% floor and the other a 12% cap and 0%. Both are doing very well and I'm not exposed to market risk or taxes
@harrycq81
8 жыл бұрын
Hey Scott, can you break that down in English for me? Lol, I'm trying to learn compound interest. Thanks!
This is really helpful for the simple fact social security retirement might not be a thing in 40 years so we should definitely start by continuing to work harder and start saving this way. Tell you one thing I don't want to be working after 65 when I'm supposed to be enjoying the golden years of my life so I'm definitely going to start with small amount and then let it snowball from there.
Super easy explanation! Nailed it 👍
That is the difference between exponential and linear growth kids!
@teemoladevul61
5 жыл бұрын
im guessing its the same as simple intrest and compound intrest
Thanks for explaining it so clearly.
Thank you for this simple yet helpful video, appreciate it
Not the simplest explanation, but good enough :) Compound interest is the best thing you can take advantage of with your savings... If you invest in broad, passive index funds for a long time, you will be a millionaire. It is that simple :)
Sooo... the more tests i fail the less i know on the next test and so on? makes more sense now ty investopedia
Long Term investing through Fidelity or Vanguard at ≈ 12% interest compounded annually.... now thats a reliable millionaire formula
@rhdtv2002
5 жыл бұрын
I'm at 17% this year in my Fidelity..
@dougruwe288
4 жыл бұрын
What about now? 😂
@peter-jm1pu
4 жыл бұрын
Lol. Nice one.
@stanleymichaelramirez4265
4 жыл бұрын
@@dougruwe288 Dollar Cost Averaging👌🏼
@dougruwe288
4 жыл бұрын
Stanley Michael Ramirez On sale! I’ll take it.
This says a lot about our society. And yet, we live in one.
Simple and easy to understand. Goodjob 😊
It's all simple now; thank you
@enoughnonymity
8 жыл бұрын
+Seth Thomas simple intrest lol
Simple video, but great content!
Thank you. This was very helpful.
Awesome video!
I'm searching more about how compounding interest works as I learned that the 5% you earn annually from mutual funds or stocks, can be earn monthly thru compound investment by investing in fx.
Awesome video! Compound interest is so important for achieving long term wealth!
whats the song in the background?
Great Video!
Where do you go to get an account to get compound interest?
Simple but powerful
great video!
The visuals helped, thank u so muc
Great video
Thanks for this video! It's going to help me for my scholarship exam!
@patienceagbey1402
9 ай бұрын
Did you pass
@darklordhyper
9 ай бұрын
@@patienceagbey1402 got 228 out of 300 so ig I "passed"
Goddammit this the thing which i ws looking for.. Its been whole day I was not understanding this fucking concept and i found this little video.. Very thankful.
How do you put that 500 back into the account to earn interest on interest without selling shares? Or do you sell shares to earn compound interest?
@jennifertodd6633
3 жыл бұрын
This is the right time to invest in cryptocurrency The biggest secret in profiting from forex is by getting a varified trader who really understands the market to trade for you while you take zero risk of losing or blowing your account... inexperienced and inconsistency kills alot of amateur traders hopes.. I personally earn $10,000 every week trading just because someone who understands the market really well is in charge of my trades.... I'm happy to share my success to Mr Donald has a reliable and consistent trader.. he's a genius.
Taking the right steps as a beginner in trading requires lots of preparation, developing the skills and using proper risk management which is a psychological torture between fear and greed. My advise is don't lose your hard earned money when there're other ways to simply the process with the help of an experienced financial consultant.
@brianrosetti4684
3 жыл бұрын
This is just the simple truth not everyone understands the commitment involved while trading and not everyone is ready to lose their money.
@bertramknoesen9170
3 жыл бұрын
It is better to entrust the creation of your trading portfolio to professionals thats to follow a large whale like a small fish.
@royalwaves6573
3 жыл бұрын
Well said, trading successfully is my goal and I believe anyone trading want to achieve consistent profits.
@dylancredence3870
3 жыл бұрын
Its achievable with the right guide, it can either take up one's lifetime to master or one big push of luck at an extremely opportune occasion.
@shilohnovick6115
3 жыл бұрын
How is it going for you? I'll admit that I need help, I can't be on the screen all day.
How did you get to the 11,025 can someone let me know
this was like... the most helpful video i have watched in a while. my math professor doesn't explain shit so i had no idea what was the difference between compound interest and simple interest
ok what im wondering is lets say i start saving money now and i put 30 dollars in a savings account and slowly add money to it unil I reach 1000 dollars till the end of the year will the interest be calculated upon the initial (principal) 30 dollars or will i get an interest of the 1000 dollars? what if I have 0 dollars in the savings account for the whole year but put in 5000 dollars on the 31th of December? And if I put in the initial 10.000 dollars for the compound interest, does the bank lock that money for the coming 3 years?
@dankean7932
8 жыл бұрын
+The Jackal The bank calculates on on a daily basis & pays monthly. The example above is being paid 5% annually. Where as a normal bank account is paid Monthly. So your interest would actually compound more over time than the example above.
Simple and easy to understand! Thanks
good teachings. makes you think
Very useful.
Brilliant. I understand it now!! Many thanks. 😁😁👍👍👍
@joannworden8132
3 жыл бұрын
Forex trading comes with a lot of timing and thinking and calculations before you can start earning. for beginners it comes with a lot of losses, for amateur more losses and few wins it best you allow professionals trade for you and also learn from them with the help of Mrs Sarah Williams and her broker I have made $55,000 she trustworthy and transparent I have been trading with her over two month now if you are a legit broker and professional forex tradr to start trading with I totally recommend mrs Sarah Willams you can contact her via WhatsApp by clicking this link wa.link/h6eq5w
I need to do this when i start working.
@dylancorroboy1554
3 жыл бұрын
You working now?
love this video
Gotta love Compound Interest. Compound Interest > Simple Interest
So how do I go about abstain this account to earn this interest asap
Muy buena explicacion, exelente
This is why having a 30 r mortgage sucks
@Luckbeats
4 жыл бұрын
Well what else are people going to do
@SillyGoose2024
4 жыл бұрын
@@Luckbeats if u cant buy outright, then rent.
@Luckbeats
4 жыл бұрын
But 99% of people won’t have the money to buy outright and if you’re renting you might as well get a mortgage because it’s going towards YOUR house rather than someone else’s
@hithere1036
4 жыл бұрын
Depends an awesome thing if investing in real estate more cash flow
@SillyGoose2024
4 жыл бұрын
@@Luckbeats very little goes to paying your house. Something like 25% of your mortgage payment each month actually goes to paying off the house. The rest goes to taxes, escrow and interest. And anything goes wrong with the house ( and it will , often) the homeowner is responsible. Not the renter
very nice explanation man
Lets say i made 5% on stocks. I bought it at 10 and sold it for 10.5. Now i am going to reinvest my 10.5 in the same stock, but it doesnt cost 10 any longer?
Excellent Excellent Excellent experience
does compounding interest also apply in mutual fund?
@rhdtv2002
5 жыл бұрын
Yes..the real magic usually happens once you have 100K in your 401k..
thanks man!
I understand compound interest but i do not understand how compount interest can be obtained in the stock market if stock prices give you simple interest returns.
Great Video I like what you’re Sharing Keep up the Good Work #LinkingMoney
watching this for a class in 2021, anyone? money money money, ain't it funny, in a rich man's world.
شكرا كثيرا يا صاحبي
Thank you
10/10 Video👍
The missile knows where it is at all times. It knows this because it knows where it isn't. By subtracting where it is from where it isn't, or where it isn't from where it is (whichever is greater), it obtains a difference, or deviation. The guidance subsystem uses deviations to generate corrective commands to drive the missile from a position where it is to a position where it isn't, and arriving at a position where it wasn't, it now is. Consequently, the position where it is, is now the position that it wasn't, and it follows that the position that it was, is now the position that it isn't. In the event that the position that it is in is not the position that it wasn't, the system has acquired a variation, the variation being the difference between where the missile is, and where it wasn't. If variation is considered to be a significant factor, it too may be corrected by the GEA. However, the missile must also know where it was.
this would have been a bit more powerful if you contrasted compound interest at 3 years vs 30 or even 50 years, since the real magic occurs decades down the line.
@rhdtv2002
5 жыл бұрын
Agreed. I did that with my 10 yo son with a simple 100 a month over 40 years...with a modest return of 6%..he was floored. Then I showed him a few thousand a year and he told me when he could invest..lol
@moldymoss3991
2 жыл бұрын
@@rhdtv2002 Your son can starting investing at any age, even if he's under 18. Take advantage of a custodial account. I'm 15 and I love getting dividends!
this is great
yes, but where can compound interest be established? MMA? CDs? Mutual Funds?
Long term investments adds up to making interests bigger. I started investing in the last quarter of 2019,and I've garnered a cumulative of about $380k from my $20k investment. One other notable factor for interest depends on the portfolio and the commodities involved.
@nguyenpeter4035
4 жыл бұрын
What are the agreements of the Portfolio with which you trade with? I used to trade with a manager who takes a 30% Brokerage commission from me for his Brokerage platform.
@elizabethcrestwood3923
4 жыл бұрын
@@nguyenpeter4035 Yea.
@elizabethcrestwood3923
4 жыл бұрын
Your manager would have probably been working for a platform and that's understandable for the commission. Whereas I trade with an Independent Broker Certified by the FINRA body. He takes 15% renumeration at the end of trading cycle from my ROI.
@elizabethcrestwood3923
4 жыл бұрын
%benfredricky@gmail--com:% -
@elizabethcrestwood3923
4 жыл бұрын
+44 2030954603
helpful thanks
How do you find or find out if your bank offers this? Like i dont even believe this saving accounts exist lol best i found was 2.5% and pretty sure its not compounding
This helped
where the heck can you get a 5% interest savings account?
@nicorengifo5374
6 жыл бұрын
Its hypothetical
@simulationking950
4 жыл бұрын
Nepal it's 10.25%
@lionelkart646
4 жыл бұрын
In india
@SprSamson_
4 жыл бұрын
Some fixed term savings accounts do but you start with a balance of zero is it drops hugely after a year.
Absolute banger
Yes this is good in theory but how do we apply it to the stock market? Let’s say the stock you have grow in price, you can’t do anything with that growth until you sell it, but if you sell it and go and want to buy more with the difference between what you paid and what is worth now you can’t because the price is obviously higher. it’s a rhetorical gain. The only thing you could do is use the dividend the distribuite (if they do) to buy more of that stock, is that what you mean? Please help me understand, when you say the stock market grows let’s say 10% you don’t get that 10% to reinvest it and use the compound interest do you? I don’t know how in practice to follow that exponential increase of earning interest on interest.
@MrsGG-id1os
Жыл бұрын
I agree with you. Theory vs Practice is so hard to dicipher. Did you figure it out?
Wait, I'm confused. I'm doing this for financial lit class and so as I was doing the math, I ended up getting 11,576.25. How was he able to get 1,576.25 if I got 11,576.25?
@eccentrictrolling3481
7 жыл бұрын
He stated the amount of money you earned through interest, you stated the total amount of money in his account after 3 years of compound interest.
@Answers721
6 жыл бұрын
To understand compound interest- on how it builds on-top of itself month after month- here are your monthly payments rising month after month. $40.74 $40.91 $41.07 $41.24 $41.41 $41.58 and continue down until months 34, 35, 36 $46.59 $46.78 $46.97
So why is compound interest a good thing ? For a few extra dollars or wat ? Im new & learning the ropes of investing that’s all
@jakerubin2250
5 жыл бұрын
Look up warren buffet. He uses that same principle and is growing Berkshire Hathaway at an insane speed. I think he’s gained over a billion dollars in net worth this past year and he’s worth just under $90 billion I think. In the beginning the interest may not seem like much, but in the long run I guarantee you’ll be impressed with the large amounts of money you’re making.
Thanks
Interesting.
I like the concept of compound interest; but I prefer to apply when interest/return rate varies through time.
nice vid
Is it just me but this music seems so catchy.
What happens if you put, $100 in for the compound interest, every day, for 1 year, After 1year compound interest, you have to pay all the money back, or keep your money, when I'm compound interest every day for 1year compound interest.
Omg this was so helpful
Had to watch this for a homework I was doing and I don't know why, but the music reminds me of Spongebob haha
@gaymer2574
3 жыл бұрын
lmao same
@yankymate2314
3 жыл бұрын
same here lol
So... if I understand this correctly, it's just borrowing someone money and saying that the interest is x% and over y time the interest becomes greater by x%. Right?
@linearmemories
4 жыл бұрын
The Chronitic not quite lol
@NikolaZagorac
4 жыл бұрын
@@linearmemories Can you explain then?
@vm3699
4 жыл бұрын
No it's like the money you borrowed is x , for y interest say for 5 years . The first year your money is (x+y) the second year it is (x+y)+y% of the (x+y) ... So it goes on and on like that
@linearmemories
4 жыл бұрын
@@NikolaZagorac If you put $100 into a bank account with 5% compound interest per year, you will end the year with $100 + 5%, or $105. The next year, however, you will end with $105 + 5%, or $110.25. The first year, you were given $5 in interest, while the second year you were given $5.25 in interest; that is compound interest. Without compound interest, you would gain $5 every year, because 5% of your initial deposit of $100 will always be $5. This may seem like an insignificant difference - $0.25 over the course of an entire year - but when this is done on a large scale, individuals may be able to generate ever-growing and livable income. Just to hammer the point home, if your initial deposit was $1,000,000 and the bank offered a 5% compound interest rate per year, you would end the year with 1,000,000 + 5%, or $1,050,000. After the second year, you would end with 1,050,000 + 5%, or $1,052,500. The second year you made $52,500 as opposed to the first year where you made $50,000. You can imagine what this value would be after 10, 20, or 30 years.
how does this work if all my stocks go down everyday
Perfect
@joannworden8132
3 жыл бұрын
Forex trading comes with a lot of timing and thinking and calculations before you can start earning. for beginners it comes with a lot of losses, for amateur more losses and few wins it best you allow professionals trade for you and also learn from them with the help of Mrs Sarah Williams and her broker I have made $55,000 she trustworthy and transparent I have been trading with her over two month now if you are a legit broker and professional forex tradr to start trading with I totally recommend mrs Sarah Willams you can contact her via WhatsApp by clicking this link wa.link/h6eq5w
Finally posted on KZread - what took you so long guys?)
I'm going to fail and i rewatched this video 7 1/2 times :')
@BusinessWolf1
5 жыл бұрын
You put money into an account. After 1 year with a 5% compound interest it makes you 500 dollars. After it makes those 500$ it adds them into the account on top of the money you put in. So let's say at the start you put in 10.000$ you would now earn a 5% compound interest on 10.500$. And this cycle repeats every year until you rob the bank dry. This is also called exponential growth.
Who had to watch this for school
@Sanie00
4 жыл бұрын
me lol
@zenmaster5236
14 күн бұрын
I had to watch this after high school
out of subject how can i make like those animated videos !!