I reckon the first wonder of the investment world is the power of compound interest

Livewire News

Livewire

I reckon the first wonder of the investment world is the power of compound interest. It's well-known that growth assets like shares and property provide higher returns than defensive assets like cash and bonds over long periods of time. This is because their growth potential results in higher returns over long periods of time which compensates for their higher volatility compared to more stable and less risky assets. The next chart is my favourite demonstration of the power of compound interest in action for investors. It shows the value of $1 invested in 1900 in Australian cash, bonds and shares with earnings on each asset reinvested along the way. Since 1900 cash has returned 4.8% per annum, bonds have returned 6% pa and shares returned 11.9% pa. In this article I explain what compound interest is, demonstrate it in practice and look at some implications for investors. (VIEW LINK)


Livewire News
Livewire News
Livewire

Livewire News brings you a wide range of financial insights with a focus on Global Macro, Fixed Income, Currencies and Commodities.

Expertise

No areas of expertise

I would like to

Only to be used for sending genuine email enquiries to the Contributor. Livewire Markets Pty Ltd reserves its right to take any legal or other appropriate action in relation to misuse of this service.

Personal Information Collection Statement
Your personal information will be passed to the Contributor and/or its authorised service provider to assist the Contributor to contact you about your investment enquiry. They are required not to use your information for any other purpose. Our privacy policy explains how we store personal information and how you may access, correct or complain about the handling of personal information.

Comments

Sign In or Join Free to comment