Interesting overview highly rated Investment Strategy, Best Penny Stocks, Load Mutual Fund, and Do Individual Stocks Compound, How to Earn Compound Interest Investing in the Stock Market [For Beginners].
Learning how to earn compound interest can be one of the most powerful and important decisions someone can make in their life. That is my goal for this video. To teach you how to earn compound interest by investing in the stock market and grow your wealth.
One common misconception I want to address is that you only earn compound interest when you reinvest dividends. This is false. Any stock can compound your money if they grow their business. The compounding comes from the overall growth of the company and is not dependent on the dividend. When non-dividend paying companies like Netflix earn money, instead of paying it out to shareholders and losing the cash, they reinvest it themselves. This reinvestments makes to company more valuable, which in turn makes your investment and shares worth more money.
Another thing I mentioned in the video is a little tip to help you save and invest more money that I personally use. $1 invested in the stock market at an 8% rate of return will grow to over $21 through the power of compounding. Anytime you are buying something or shopping for stuff you don’t necessarily need just think to yourself “every $1 you spend is a dollar that won’t grow to be $21”. You’ll find yourself not only saving more money, but also ramping up your investing. For example if you’re considering buying a new jacket that costs $40, think to yourself “Is this jacket worth $840”. Another way to put this in economics terms by the opportunity cost. When you buy something the opportunity cost is the money those dollars could’ve made if they were invested.
Albert Einstein referred to compound interest as “The eight wonder of the world”. Warren Buffet said “My wealth has come from a combination of living in America, some lucky genes, and compound interest”. I’m not one to argue with one of the smartest men to live and one of the richest. Compound interest is a way anyone can build wealth over a long period of time relatively easy with some consistency. The way compound interest works is that you invest your principal amount in the stock market in order to earn interest. This interest begins earning interest of its own which grows the principal which leads to more interest and the cycle goes on and on. The growth is really slow and boring in the first 5, 10, and even 20 years.
Index funds are a great way to earn compound interest in the stock market as appose to picking individual stocks. Picking individual stocks is very difficult and the odds are not in your favor to outperform the market over a 10-15 year time period. Even most professional money managers can’t do it. The solution to this is index funds. Index funds are a collection of stocks that are grouped together to track performance. The S&P 500 is a very popular index of 500 blue chip stocks here in America. By investing in an index such as the S&P 500 you own a small piece of every company in the index. This eliminates most of the risks associated with purchasing individual stocks. If one company goes bankrupt it’s not a big deal because you have 499 other companies to pick up the slack. Not to mention the S&P 500 has averaged a 10% rate of return from 1926-2018.
Time is the most important factor when it comes to investing and earning compound interest. The younger you are and the longer time horizon you have, the better your results are going to be. In the video I gave a few examples. If you invested $15,000 at an 8% rate of return over 20 years that number would grow to $100,912. But if you let it sit for another 20 years and don’t add anything to it you’ll be left with $678,888. Pretty ridiculous how just letting your money sit for longer provides you with substantially more money. The absolute coolest thing about this example though is that waiting one last year from 40 to 41 you will have $746,777. Over $68k just by waiting another year. Now imagine what the numbers would be if you made regular contributions.
I hope you guys enjoy this video!
M1 Finance link: https://mbsy.co/vTwmR
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Helpful Investing Books
1. Rich Dad, Poor Dad by Robert Kiyosaki
2. Think and Grow Rich by Napoleon Hill
3. The Simple Path to Wealth
5. Total Money Makeover by Dave Ramsey
6. How to Day Trade for a Living by Andrew Aziz
7. A Beginners Guide to Investing
8. The Millionaire Next Door
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Disclaimer: This video is an expression of my opinions. I am not a financial advisor and the content in this video is meant for educational purposes only. Always do your due diligence when considering investment options. This page does contain affiliate links which means that for no additional cost if you use the link to purchase a book I will receive a small commission.
Do Individual Stocks Compound, How to Earn Compound Interest Investing in the Stock Market [For Beginners].
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Why we utilize this as our stock investing vehicle will be explained later on. Evaluation your portfolio often and hold on to the stocks as long as they are carrying out well. Yet, in both cases, the real stock only cost 10 cents.
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Take your time and make certain to select the best ones. When they trade their will be massive modifications to the supply and need of a stock. There are lots of things to gamble on here. Individual Stocks shouldn’t be among them.
I’m a huge proponent of investing for yield. When a stock pays me cash quarter after quarter, I love it. I like absolutely nothing better than to see those dividend checks rolling in. This got me thinking. Are dividend stocks actually the method to go? A great deal of financiers are blindly throwing cash at any stock paying a dividend. Are they injuring themselves?
When looking for excellent financial investments in the stock exchange concentrate on industries instead of on Individual Stocks. Stocks in the same market tend to move together as a group, however every market has its winners and its losers. Be cautious of any stock that under performs its peer group.
You can succeed in stock exchange by investing in the long term. If you desire to succeed in the long-lasting take a look at little cap stocks today that offer the potential. How do you find them? Take the suggestions of one if you’re not the expert. Look at little cap stocks that use potential. Evaluation your portfolio frequently and hang on to the stocks as long as they are performing well.
The best stock investment suggestions is don’t buy Individual Stocks! Rather go with no-load mutual funds and exchange traded funds. Ideally mutual funds and exchange traded funds (ETF’s) with low expenditures and broad diversification – such as passive or index funds.
Blue-chips are likewise growth stocks. These are little tolerance to dangers Individual Stocks. They are trusted and safe and the financier is assured of routine dividend income. The only concern is at what rate you purchase the share. The entry level estimations of returns might not be motivating, but they are definitely helpful for the long-lasting development and stability of the portfolio.
They pose as the champions of us little financiers, however fall into the very same growth-in-market-price trap the Wall Street facility desires us locked into.
Conclusion: Knowing to deal with stock exchange fluctuations with equanimity can enhance your monetary image substantially. Extremes of all kinds tend to fade out in time, so prevent rash relocations at all costs. If necessary, leave your portfolio for a while and return when things cool down.
4) Recognize that the marketplace is much simpler to forecast in the long term than the short one. Peter Lynch beautifully elaborate that regular folks have an edge in buying a home instead of a stock.
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