Compound Interest Explained in One Minute
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- เผยแพร่เมื่อ 16 ต.ค. 2024
- A lot of savers underestimate the power of reinvesting, they don't understand just how much of a difference compound interest makes.
Can you simply spend the interest on awesome products/services without reinvesting? Sure but there's a price to pay. The effects of compounding seem underwhelming if you only look at them over a cycle or two but in the long run, the difference between the portfolio of someone who leverages the power of compound interest and someone who doesn't is huge.
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This is the type of stuff they need to teach kids in highschool.... Same as budgeting....
Appreciate the kind words :)
they do
@@crinzboy9136 im in middle school
nd im learning this for exams
They won't because they need mindless worker drones running the counters and machines, not everyone can be rich but if you figure out what's going on and think smart no reason why you can't join the big leagues but yeah the world wouldn't work the way it does today if everyone was savvy about finance.
I'm in highschool learning this rn lol
Congratulations John, you played yourself.
Alex Sanchez man this is fast make it 5min
Facts!
Jhone invested in a high paying company in which he own that he sales named bran clothes that are very much over prices for a faction of his money he saved
Lesa spen it all on collage lone
John ain't here for a long time but a good time
@@lwe_12😂😂😂 accurate John would’ve learnt
Straight to the point and makes sense. Thanks bro.
You're more than welcome Thomas, really glad you found the video useful :)
Whew! Super simple explanation! I love this!
Short and succinct, I love this . Thank you
Short and short. Which is not the shortest way to say short. How ironic.
The problem is that with inflation , money just decreases in value which is why investing might be better
Investing also decreases in value then
@@Dr.Huzeyfe Oh right😂
@@Dr.Huzeyfe what about gold and silver bro? It's limited on earth, so it is good for long-term investment
@@bharath7730 thats the best option right now
@bharath7730 no, you're investing in another means of exchange that's archaic. It's only practical use is in electronics and energy, which might be fine for that
this needs quite a lot of patience
Well that's was better explained than other videos.... Thanks man...
I came across your channel through this video-case studies are incredibly valuable, and I'm eager to see more in the future! Building wealth involves establishing routines, like consistently setting aside funds at regular intervals for smart investments.
You're correct. I think the smartest way to go is to spread out your investments. By putting your money into different asset classes like bonds, real estate, and stocks from other countries, you can lower the risk if one part of the market goes bad.
That sounds like a good plan. In the past two years, working closely with a financial market specialist, I've built a six-figure diversified stock portfolio. Now, I aim to diversify even more this year.
Talking about a financial market specialist, do you consider anyone worthy of recommendations? I have about 100k to test the waters now that large cap stocks are at a discount... Thanks
Thank you for the lead. I searched her up, and I have sent her an email. I hope she gets back to me soon.
bro my teacher confused me in this topic but thanks to you i understood compound interest so easily
Brilliantly explained
Thank you :)
thank you, this video has given me insights and clarity. I was struggling to understand all em books. Appreciated
Glad it helped! :)
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John lives in the moment
That can get quite expensive :P
Your videos are awesome, dude! What program do you use to make the animations? :)
Vyond
what about inflation how much will final calculation be affected after taking account of average inflation rate?
This video is good but lacks the most important part: where are you going to find a bank that offers you 10% of compound interest a year??
Well, at least we're closer now than when the video was published :)
The S&P 500 Averages about a 10% return each year
How would interest be compounded daily though? In the instance of a CD?
Yes, can you explain compounded daily and compounded monthly difference?
This video is AMAZING!!!!
Thank you so much!!! :)
way too fast for my brain. i wouldn't mind if the vid was 5 mins. I should be able to understand
Swear🙁
Not trying to be mean but try slowing it down if you have to
nothing caught my little brain but I decreased the playback speed LOL.....😅😅😅❤❤❤❤ WELL EXPLAINED... THANK YOU!!!
I apologize for sometimes going overboard speed-wise, TH-cam's playback speed reduction feature can indeed be a blessing sometimes :)
Perhaps you should look at the inflation in 30 years
If only banks actually give 10% interest rates for savings
Be careful what you wish for :D
Plot twist: the woman died at year 15 without taking anything
One Minute Economics needs your help! Please give me a minute (heh) of your time by watching the following video if you find the channel useful, literally anyone can help (either financially or by spreading the word about my work): th-cam.com/video/io04ckq1X1M/w-d-xo.html
Now to find someone who gives such a good interest rate 🤨😜
Heh, good luck with that! :D
For the past 50 years, the S&P 500 returns over 8% per year on average. QQQ etf almost 11% since 2020. Apple & Microsoft stocks over 20% per year for 20 years. If you look, you will find plenty of opportunities in the stock market.
I really like this video because it easy to be understand
Awesome, glad you find it useful! :)
Danny brought me here iykyk
Great video!
Need a video of how or where distributions from 401k come from. For example... Day 1 of retirement I withdrawal $10,000. My 401k consists of 20% contributions and 80% gains. Does it start with my contributions first until all of my contributions are gone? Or will $2,000 be taken from contributions and $8,000 be taken from gainsbto balance the 401k account?
If you're still wondering this: Your 401k is essentially a stock portfolio. When you withdraw 10k, what you are doing is selling enough shares of stock to get 10k. Your gains are basically the total gains of the shares you've sold to get 10k.
@garhong9125 I got my answer from my Fidelity Benefits Coordinator. The way they do it is by equally distributing you contributions and gains. For Example: Entire portfolio balance consists of 20% contributions and 80% gains. So if you withdraw $10,000... $2,000 will be come contributions sold and $8,000 will come from gains sold. This way your entire portfolio will stay balanced.
On point wow, some videos were complicated.
Glad you liked this one Miguel :)
Lisa was 100 after 30 years 😂
So?
This is fast dude make it more than a hell of 1 min
Some of my videos are a bit too fast-paced, been working on it and getting better... I hope :)
A person who starts working receives a salary of 7 million VND/month.
Every 1 year (12 months) that person gets an 8% salary increase.
a) After n months (n≤12) that person receives a total salary of Sn= 7n million VND.
Is statement A true? becaues in your video you said that in the first year you still got 100$ instead of 1000$ So in this problem , i think that in 1 year you still have each month 8%/12
It would have been good to compare John to simple interest
Very very clear
Lisa is smart
So basically i would just make a one time investment and leave it alone while compound interest does its thing?
Depends on the nature of the investment and whether or not compounding is possible, but basically yes :)
The key is never takeout your money and buy stupid things. Instead, keep depositing as much as you can every month - minimum of $50 a month for 30 years. You may come out with a million dollar if you play it right.
Everyone at work complaine they are broke woth expensive clothes and their me just setting on money 😊
I am interested because even interest earns interest
I see what you did there :P
Thank you
You are more than welcome Harsh :)
which software is used for the animation?
Hi, Vyond is used for the video animation :)
@@OneMinuteEconomics thanks a lot
Are banks the only places that offer a compound interest?
Nope
@@OneMinuteEconomics where else?
The money may not worth the same in the future. Enjoy now and be careful with investment.
I finally understand this 😭
Glad to hear (well, read) it :)
John was smart
I have 20k saved up as a 21 yr old what should I do?
At your age, I don't think anything can come close in terms of potential returns to plain old investing in yourself... investing in education, skills, anything that helps you become better professionally. Also, please do not take your physical health for granted, any money spent making progress in that direction also represents a wise investment!
Its 1:27
john bad lisa big brain
:D
But my question is where? Mutual funds? CDs? Money market? Because the last two will not be more than 4%.
Highly context-dependent. FWIW, it's at least easier to achieve in the current interest rate environment than back when this video was published :)
Thank you!
You're more than welcome Ankit :)
Can you with 100% confidence confirm that she can buy all those stuffs that John bought for RS 3000 at the end of 30 years?
100% confidence in economics don't go hand in hand unfortunately :)
Probably a coke head... LOLOLOLOLOL
Those three thousand dollars of John are worth more than the old lady
But you didn't explain how to work out the last part
…and that's how Lisa divorced john.
Ouch!
Good one....!! 👍👍
Glad you found the video useful Isha!
Its jus depend whether u wana to withdraw and buy a car or iphone etc
Sure, deferred consumption vs. instant gratification :)
So if you dont ever take your money out, more money by the end of year 30? 😂
So basically, hold your money into the bank for interest? ?
Well, I'd say that ship has sailed haha, even if it was usually never much of a ship. The bank example represents the most straightforward choice for an explanation, but the main idea is doing *something* to generate a return that can be re-invested :)
☝️🧐 Impossible! Lisa would have spent it all on shoes.
How so they earn millions from 30 000 in 50years then?
Simple ❤
Long story short: save ur money in CI investment and try to live a long enough time.
Look like John is smarter if he use the interest eared to invest in something better because he not loosing as much as Lisa due to higher inflation rate.
Yes now add 1000$ every year to that investment and its gona be way more
Ya but John bought new shoes too look good for his new wife which divorced him after she found out he only made $100 a year & now after settlements john has no shoes, no woman & now house. Take that Lisa!
It's risky to hold money in a bank for 30 years let alone 10 sure if the economy hasn't crashed and the bank gone bust it's happy days but that's if, big risk tbh. At least first guy will have gotten something out of it
all the words went over my head didn't understand a word is it the video or is my brain not working
Neither haha, in some cases I always recommend watching a video a few times. Compound interest, especially if we are to crunch some numbers, isn't the easiest topic to tackle :)
Yeah, but John had more fun over those 30 years
Just so people say this comments section is irrelivant, here I go:
Logan Paul is a Flat Earther.
30 years for only 17 thousand dollars
I still don't understand
Feel free to ask whichever question(s) you may have and I'll do my best to help, or perhaps another member of the community will beat me to it :)
Get rekt, John
This is for math.
Delay gratification…
No bank pays 10%
Some of our more mature community members would beg to differ :)
@@OneMinuteEconomics S&P500 Vanguard ETF :)
Lesson: Be like Lisa
:)
It's sad how poor people are shamed for using welfare but rich people aren't shamed for doing this
Indeed, I've published a video about just that 8 months ago:
th-cam.com/video/HAQ60t3WeNg/w-d-xo.html
why is it shameful?
wow
:)
Banks suck I'll stick to staking with crypto
Plenty of room for both dimensions in our lives IMO
oof john wasted his money
30 years lol
:D
Literally makes no sense
If there's anything I can clarify for you, let me know :)
@@OneMinuteEconomics so basically is this referring to a bank? Do I need to use percentages ? How does the money increase ? Sorry for having terrible math skills I appreciate your time and information and would like to clarify that your video is not a bad one I am just particularly bad at picking up on math
It refers to anything at all that gives you a return, bank deposits included.
The power of compound interest becomes obvious once/if you keep re-investing. That's the key to the entire-thing, re-investing everything.
For example, let's assume you want to make money by lending cash to people. You start with $1,000 and charge 10% per month:
1) You lend $1,000 to Jane and after a month, she gives you $1,100 (your $1,000 plus 10%, so plus $100)
2) You now have $1,100 that you lend to John. After a month, he gives you $1,210 (your $1,100 plus 10%, so plus $110)
3) You now have $1,210 that you lend to Mike. After a month, he gives you $1,331 (your $1,210 plus 10%, so plus $121)
... rinse and repeat.
The main takeaway here is that those who are disciplined enough to re-invest can be rewarded very, very generously by the market. While it may not be apparent at first, there's a HUGE difference between:
A) lending $1,000 each month and receiving 10% ($100) which you use for day-to-day expenses... in other words, spending the 10% each month and re-lending the initial $1,000
and
B) lending $1,000 each month, receiving 10% and re-investing... in other words, re-lending not just the initial amount but also the 10% you receive
Develop the habit of doing this, be disciplined over a period of many years and the results are life-altering :)
One Minute Economics thank you for explaining bc I was totally lost
Thank you for clarifying
can you plz talk slower
I get carried away in some videos, sorry about that :(
You can slow the video down
worst explaination, ur being to persuasive
Sorry you didn't like the video, thanks for dropping by though and I'll be sure to take your speed-related feedback into consideration as well... I sometimes go overboard speed-wise, fair point, finding the right balance between format/speed and depth is always challenging.
If P∝E, the standard cagr formula, (1+g)ⁿ, is correct and applicable.
If P/E ∝ ROIC, then the standard cagr formula, (1+g) is wrong, not applicable.
For P/E ∝ ROIC:
The compounding multiple
= [ (1+Gnet_income)²÷ (1+Ginvested_capital) ]ⁿ
You can verify this formula in the NVR over its 26 year compounding from USD 22 to USD 6,500.