3 Financial Facts To Be Grateful For This Thanksgiving
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Close up of handwritten text “I am grateful for…” in foreground with notebook, pen, cup of tea, … [+] flowers and oil burner in soft focus (deliberate angle) getty Thanksgiving is a time of reflection and gratitude. In my family, we start off by going around the table and saying things that each of us are grateful for, such as our health, our family, our successes for the year, and our friendships. This is a discussion of three financial facts you can add to your gratitude list this Thanksgiving. Compounding Interest Albert Einstein once said, “Compound interest is the eighth wonder of the world.” The reason that one of the smartest men in history regarded compounding interest so highly is that it gives investors the power to create more wealth than they thought possible with even small savings amounts. Compounding interest is easily illustrated by the Rule of 72. This rule states that if you take the number 72 and divide that number by your annualized returns, that is the approximate number of years it takes for your money to double. Let’s say you have $100,000 and are earning 10%. Under the rule of 72, you would have about $200,000 in 7.2 years, $400,000 in 14.4 years, $800,000 in 21.6 years, and $1,600,000 in 28.8 years. You’d have 16 times your money in less than 30 years. Having compounding interest on your side is something to be grateful for. Ease Of Diversification If you’ve ever owned individual stocks before, you might have noticed that their price movement on a day-to-day basis can be extreme. Maybe you’ve even owned stock in a company that’s gone bankrupt, leading the stock value to go close to zero. Portfolio diversification, meaning owning many securities with different characteristics to reduce volatility, can improve investor returns…
Filed under: News - @ November 15, 2023 6:22 pm