I will be walking you through the Step by step guide to profiting growth on your investment and how you can use these tips and strategies to increase your wealth. I will also share with you the best performing investment organizations you would like to look at for your investment growth. However, you must know what your goal for savings and investing is so that you stay on your financial growth path and not lose focus.
“Compound interest is the eighth wonder of the world. He who understands it earns it… he who doesn’t…. well pays it” – Albert Einstein
At the point when you save and contribute, you are utilizing your underlying cash to get you more cash-flow and causing it to grow by itself(make cash work for you and we call it compounded interest which implies that you’re profiting on your unique speculation and on the gains(interest earned) in the years to come and in the event that you leave the venture untouched(without pulling back) for extensive stretches of time; the investment grows every year and exponentially in this way, and that is, on the grounds that, of accruing funds impact.
In the event that you appreciate the accruing funds’ guideline and its functions. At that point, you’ll welcome the most dominant and wonderful tool that you have that would enable you to assemble riches after some time and leave a heritage for your adored ones.
Savings Account alludes to a month to month into a savings bank account that offers an individual a chance to set aside cash and grow(it is on the interest earned premise in this manner the assets must be effectively open and available to attract interest) and fluid cash(available finances). It is generally for a momentary objective(minimum a year) as well as for an expected occasion that typically occurs on an individual’s life unannounced life’s events.
For what reason do we have to save, so we’re stating when you’re fantasizing about your future, do remember that those fantasies, objectives require cash; so the question is, where will that cash originate from? Lottery, such as Power Ball(gambling) isn’t the appropriate response, hello a few of us are not fortunate where some lost relative leaves us with some unexpected legacy, we need to work, good karma, in te event that you have won the Lottery(hope that you have put it into great use, wisely).
Savings vs Investment
Savings refers to monthly deposits into a low-risk savings account that gives an individual an opportunity to save money and grow(it is on the interest earned basis, therefore, the funds must be easily accessible and available on-demand) and liquid cash(available funds held on hand). It is usually for a short term goal( less than a year) and/or for an unexpected spontaneous event that normally happens on a person’s life unannounced/uninvited).
What are your goals – different needs that you might be saving for:
- Do you want to own your own home or car, how much will it cost you, bearing in mind that, the bigger the car or home, the most expensive & high maintenance, remember needs vs wants?
- What kind of education do you want for your children and perhaps the improvement of your own? What will it cost you, considering that education is expensive and is the best investment(gift) that you can give to your children and yourself?
- What kind of financially secured lifestyle after retirement do you want, as I am certain that you would like it to be sustainable and not rely on a paltry government pension or live off your family members and become a burden?
- You cannot really know in advance when will you need that extra money, especially during unforeseen events(sudden retrenchment, children getting sick, major operation) and Life stages(ages and stages) that sometimes throws us off when we were not looking(or didn’t see it coming) so by creating an extra cash(emergency fund) to cushion the impact that “seem” to happen spontaneously; so what would it cost to survive the tough times until you recover?
- Have you dreamt of taking a dream holiday one day to Europe or the USA or Africa or Asia before you kick the bucket(before you die) and how much will this trip cost (set you back)?
I trust that now you will realize that it is important to save for:
- Your future
- Long term plans for you and your family(loved ones)
- For the lifestyle, you want for yourself(now & after retirement – especially women now leave longer)
- Unplanned unforeseen events – an emergency fund
The basic interest is an extra sum earned (benefits on contributing and leaving your cash with the bank/monetary organization for setting aside your cash in another saving vehicle. Basic interest computation, this is an extra amount(initial store/beginning venture) paid into the bank account and then again straightforward interest is the extra income earned from the initial capital outlay.
Accruing interest alludes to when interest is added to a unique initial sum saved and the premium that has been included additionally acquires more interest(earning return on the premium) and typically determined day by day, yet credited day by day, month to month, quarterly, semi-every year or yearly relying upon how the savings account is structured, for example, a Call Account, fixed savings account, on both the principal(original venture) and the credited interest calculation will be different.
How about we take a look at an example(scenario) to show the savings account with basic interest; suppose your granny Sophie has bee saving funds R500,00 consistently for a long time and she kept her savings funds in a pantyhose under the mattress(do not chuckle, that is the thing that our African grannies did back in the day). Toward the finish of 15 years, she had gathered R7500,00. Anyway had she taken that cash and saved it into a generally safe savings account in an in the bank, she would profit by being paid a fixed % of each Rand put resources into the investment account, on the grounds that the interest of a savings bank account is low, the profits are likewise low.
The advantage for granny Sophie is that the savings account offers her safety(unlike in her home where her cash may risk being taken, lost or devastated by fire) and interest paid by the bank. Kindly remember that the genuine interest calculation of the savings funds will be less, considering the truth of inflation which consumes on the underlying estimation of cash after some time;
Investments, on the other hand, its main purpose is to build a sustainable, steady, continuous flow of wealth over a long period of time for you to realize huge returns on investment because of time. It is advisable not to withdraw/touch the investment while during its growing period, otherwise, it will not yield the desired results expected.
When you invest, you are using your initial money to make you more money and making it grow by itself(make money work for you and we call it compounding growth which means that you’re making money on your original investment and on the gains(interest earned) in the years to come and if you leave the investment untouched(without withdrawing) for long periods of time; the investment grows each year and exponentially so, and that is, because, of compound interest effect. If you understand the compound interest principle and its workings, then you’ll appreciate the most powerful and awesome tool that you possess that would help you build wealth over time and leave a legacy for your loved ones.
Consider the following investment strategy tips
- Identify what you are investing for
- Determine how much you can invest monthly
- Choose appropriate solutions for your pocket
- Make it automatic by creating a regular stop order to contribute monthly without excuses
- Monitor your progress(Celebrate milestones reached)
Savings simple interest calculation vs Investment compound interest calculation
Simple interest is an additional amount earned (profits on investing and leaving your money with the bank/financial institution for saving your money in another saving vehicle. Simple interest calculation, this is an additional amount(initial deposit/initial investment) paid into the low-risk savings account vehicle and on the other hand simple interest is the additional cost paid/charged on the original amount borrowed(principal paid/charged) on the original amount borrowed(principal amount) and not on the interest owed on the loan. Whereas,
Compound interest refers to when interest is added to an original investment amount and the interest that has been added also earns more interest(earning interest on interest) and usually calculated daily, but credited daily, monthly, quarterly, semi-annually or annually depending on how the investment is structured such as, a Call account or 12 months fixed investment, on both the principal(original investment) and the credited interest.
Let’s look at an example(scenario) to illustrate the savings with simple interest; let’s say your granny Sophie has been savings R500,00 every year for 15 years and she kept her savings in a pantyhose under the mattress(do not laugh, that is what our African grannies did back in the day). At the end of 15 years, she had accumulated R7500,00. However had she taken that money and saved it into a low-risk savings account in the bank, she would benefit by being paid a fixed % of every Rand invested in the savings account, because the risk of a savings account is low, the returns are also low.
The benefit for granny Sophie is that the savings account offers her safety(unlike in her house where her money may run the risk of being stolen, lost or destroyed by fire) and guarantee interest paid by the bank. Please bear in mind that the real value of the savings will be less, considering the reality of inflation which eats away on the initial value of money over time;
Let us look at how to calculate simple interest on savings. The equation to calculate is:- Interest = Principal X Interest rate X time
Let us say you want to save R5000.00 bonus over 6 months at a simple interest rate of 6,5% per year, and would like to know how much interest you would earn;
P X R X T = interest
R5000,00 X 0,065 X 6/12 = R162.50
After 6 months, you would have R5162.50 back with simple interest calculation
Now that we have understood the basic simple interest calculation; we now need to understand the complex compound interest calculation; although it is important for you to grasp the calculation, it does look very complicated, you do not need to carry a scientific calculator around to work out the interest, both the banks and financial institutions can do the calculation for you, so you can breathe a sigh of relief.
Let us look at the compound interest formula
P= I(1+interest/compounded over time monthly; yearly; quarterly)months X compound years (to the power of)
If you have all the information; let’s say you want to invest R2000,00 over 12 years, compounded monthly at a rate of 10% per annum, you would get R6607,30 at the end of 12 years.
2000(1+0,10/12) (12×12)144 = R6607,30
The wonderful and great news about using this compounded growth tool is that you have to save over a long period of time, for it to work effectively, it is important to start investing early so you can take advantage of time; if you delay then you’re stealing from your future and that of your loved ones and from reaching your financial goals of taking advantage of the compounded interest earnings. It does not matter where you are at right now; the good news is that you can always start to invest small regular amounts(10%) until you can graduate to lump-sum investments – so it is never too late to START and you can start Today. Best of luck.
13 step-by-step guide for effective profit growth for your investment
Need to start investing, initially, you ought to get your budgetary house so as to avoid turmoil.
You may want to agree with me that we might want to carry on with a fantabulous agreeable life at retirement age. Getting ready for that agreeable, tranquil, retirement days, is a long journey(process) that requires tolerance, strengthening, cautiously all-around idea out plans(series of choices). There is a pearl of intelligence that says, “Rome was not built on one day”, so it requires persistence and information and not sail around the harbor but genuine riches were never assembled medium-term. Before thinking about different and some of the timeless investment choices, you have to prepare yourself by conducting desktop research and understanding of the significant secrets(strategies) for effective investing:-
- “Eat first” = save first before you contribute: pay yourself first by verifying and ensuring you and your family’s future(emergencies) are taken of. It implies that when you get your pay, you should cut it into various bits, for example, save a few, spend some and pay over what you owe(in that sequential order).
- Start right on time: by beginning early, “The earliest bird catches the fattest worm” it gives you an opportunity to gain the advantages of benefits of compounded interest and growth on your ventures and enables you to commit errors and acquire knowledge while doing it. It is never past the point where it is impossible to begin, the main point will be your technique and risky appetite(do you have a low/protected, medium or significant yields character drive).
- Think about the risk of your investment(venture): Understand that the risk influence the profits and growth capacity of your speculations to get the chance to understand what sort of a speculator you are. Higher returns yields imply greater risks, so be set up to lose harder and more noteworthy. It is smarter to pick a comfortable level that you are alright with, that you can bear the cost of emotionally(tolerate) and financially(risk picking up or losing). Your risk appetite ought to consider and maybe to a greater extent to suit your salary, family circumstance, and life stages and age.
- Take a look at the Bigger picture: It is important to get your work done before you start to contribute, understand your monetary circumstance and how the chosen investment path picked fits into your lifestyle; additionally look at your debt burden trouble, tax circumstance, capacity to support the retirement account and insurance inclusion.
- Avoid get -rich- quick- schemes: If it sounds too good to be true, it probably is, genuine riches is built over some time, through long term speculation and persistence, just have a look at Warren Buffet.
- Think long term(have a long term view strategy): Make up your mind and keep it set on the chosen wise investment and hold it for an extended length and don’t chop and change regularly when the market isn’t performing the outcome you expect over a brief timeframe; even the best performing investments experience great and troublesome or tough(high and lows) periods. The changing venture might be costly and furthermore you might miss out on potential earnings(compounded dividends) while in the depressed period. Many ventures just show genuine significant growth after a stretch of time, for example, 5-10 years.
- Try not to place your eggs in one basket(diversify your portfolio): You should hold an assortment of investments(make sure you have a scope of low, medium and high-risk speculations); this enables you to be cushioned when something turns out badly, for example should you put your money into shares(equity/stocks), contribute both locally and all-inclusive, so that if the nearby market is down you can pick up in the worldwide market and the other way around and maybe additionally consider property(real home) or unit trusts or cash.
- Contract and choose a financial advisor you trust or resonate with you: Before you contribute your well-deserved cash, ensure you teach yourself(read up& educate yourself about the investment world and don’t surrender everything over to your counsel). Self Empowerment through learning enables you to have power, control and furthermore encourages you to evaluate the skill of those whom you contract and to understand your very own needs. Ensure that the guidance you get is important, precise and originates from a decent earnest heart and that legitimate needs investigation is directed by your counsel to align your goals and monetary objectives.
- Limit charges: Ask to see the breakdown of all organization costs, broker’s commission and bonus upfront before signing any strategy or investment, to perceive the amount of your venture goes to take care of organization management fees and what amount is really put in light of the fact that the more you pay in commissions and the executives expenses on your investment, the more & longer it takes for the profits to be earned- return on investment(ROI).
- Past performance is no indication(guarantee) of future returns: Like life, speculations are additionally erratic; it doesn’t imply that if a venture has done extraordinarily well previously; it could similarly too continue accordingly later on; it relies upon such huge numbers of components, for example, the market performance, the economic environment, the financial condition, the managing committees of board decision procedure and opinions, tax system, inflation(as it destroys into your investment growth potential).
- Consider Tax system: exploit tax-deductible retirement/bank account and furthermore educate and comprehend the effect of taxes on your investments and engage your advisor about adjusting your investment portfolio to keep it balanced and to address the issues of changing occasions and conditions.
- Protect your Pension/Provident fund: when you move in between jobs(occupations), don’t be enticed to cash out your money out generally the taxman will be prepared to jump on your well-deserved money throughout the years (wind up paying exorbitant fees) and you miss out on the impacts of compounded interest earned, so safeguard your reserve funds – Preserve, preserve, preserve as much as is conceivable!
- Survey your investment regularly: read effectively all announcements(statements) cautiously and be on top of your game(understanding) and check your profits(returns) habitually and frequently.
This one of the best performing organizations that you may want to look at for your investment growth(units trust) opportunities.
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