Thursday, 6 October 2022
Written by MYTHEO
Whether it's the latest iPhone, Samsung, or Google Pixel, how much do these pricey purchases really cost you?
That was a key question we asked our highly experienced Chief Investment Officer, Matthew Stuart-Box, at our latest #MYTHEOLive Webinar.
In case you missed it, you can watch the full webinar here, but in the meantime, here are 4 key takeaways we think you should know.
1) Compound interest is when you earn interest on both the original investment and the interest you earned in the past.
For example, if you invest $100 at 10% per year:
● In year 1 you earn $10 interest ($100 x 10%)
● In year 2 you earn $11 interest ($110 x 10%)
● In year 3 you earn $12.1 interest ($121 x 10%)
● In year 4 you earn $13.3 interest ($133 x 10%)
● In year 5 you earn $14.6 interest ($146 x 10%)
As this shows, the value of your assets grows faster each year.
2) Through compounding, as your holding period gets longer, the expected value of your investment increases exponentially. So, if you have time, all you need to do is invest in the market and allow returns to compound.
3) What would happen without compounding? You would earn the same amount of interest each year which would make a very big difference to your total assets over the long term.
For example, after 50 years, $100 with 8.5% per annum interest becomes:
● $5,909 with Compounding
● $525 with Non-Compounding
4) So while the latest and greatest smartphone could cost you RM4,200 now, that money could be worth RM31,971* in 30 years’ time. That's 7.6 times more if the money was allowed to compound!
*Assumes 7% annual rate of return, compounded annually.
Don’t let this knowledge go to waste, tap into the power of compounding today with MYTHEO.
MYTHEO’s algorithms will build and maintain a highly personalised portfolio for you. On top of that, MYTHEO will automatically rebalance and re-profile your investment portfolio regularly to ensure it continues to match your financial goals and risk tolerance.
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