![]() ![]() Elon has invested for 25 years and jack on the other hand has invested for 15 years. Compounding gives you gains if you are a long-term investor. Nearly 1/3rd of what Elon has accumulated. On the other hand, Jack's investment for 15 years has given him an amount of $381k. His investment strategy for 25 years has given him an amount of $1.18 Million. Īt the age of 45 years, Elon's investment has made him a millionaire. In both cases, the rate of return is 10% per annum. ![]() He has also been investing $1000 per month in equity. Jack has started investing late, at the age of 30 years. However, there is a significant difference in how they have approached their investment strategies.Įlon has been making an investment of $1000 per month in equity since he was 20 years old. They are living their life to the fullest. They are passionate about technology, cryptocurrency, building time machines, and travel. Jack and Elon are best of friends at 45 years of age. While Compound Interest adds the interest of the previous period to the principal and then calculates interest for the subsequent periods.Īmount (P+I) - The final sum that you are due to receive from the investments that you have made. The key difference between Simple Interest and Compound Interest is that Simple Interest doesn't add the interest of the previous periods in the calculation for the interest of the current period. Simple Interest (P*R*T) - Simple interest is determined by multiplying the daily interest rate by the principal by the number of days that elapse between payments.Ĭompound Interest (P*) - Compound interest is the interest investment calculated based on both the initial principal and the accumulated interest from previous periods. Interest (I) - Interest is the amount of money a financial institution or individual receives from the investment tool that they have invested in. Time Period (T) - It is the time duration for which you have invested. Rate of Interest (R) - The interest rate is the percentage growth rate at which you expect the investments to grow every year. Principal (P) - Principal is the original sum of money put into an investment instrument. ![]()
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