Money Makes Money

Gone are the days when the currency and bank deposits were the only way to preserve and increase personal savings. The development of the financial services market constrained all talk about the stock market, real estate and other opportunity to multiply their capital. Anyone investing in them, can apply the potential of these tools to increase their welfare. Nevertheless, many do not even see the perspectives that opens in front of them investment. Largely because of confusing, referring to investments by investing in themselves. Meanwhile, it is not the same thing. Investment – a way to get extra money.

Buying an asset (stock, currency, real estate), the buyer relies on the fact that in future the cost will rise. If his expectations are met, then he sells the asset at a profit. Unsuccessful acquisition leads to losses. The principle of any investment elementary: money makes money. Suppose a bank deposit of $ 100 is put at 10% per annum. A year later, the account will have $ 110, two – $ 121. That is for 2-year yield was 21%, or 10,5% per annum. How is this possible if the original return the contribution was only 10%? From a mathematical point of view, all explained compound interest, and with life – folk wisdom "money makes money".

In this case, the longer the investment period, the more money time to bring your money. After 3 years of annual yield would be equal to 11%. The task of investing is to use this unique opportunity to increase capital. Yet many people do not give the capital work, content with brief single jobs. Figuratively speaking, investing is akin to sculpting a snowball. As the snow sticks to the first snow, and the percentage of "stick" to the initial investment. If all while removing the accumulated profits, and the value of initial capital will remain unchanged. Consequently, one of the main principles of investing is in a continuous cycle of money. The longer they work, the greater the final amount. It is important to invest only free money. Otherwise, the contingency is too big a temptation to spend will not only profits, but the original investment.