To make your long-term financial objectives a reality, you must harness the power of compound interest/returns. Here, “Outside Looking In” explains why compounding really is magic – particularly for Vietnamese investors putting their money to work in the stock market.Albert Einstein famously called compound interest “the eighth wonder of the world” – and this is no overstatement. So, what is compounding, why is it so powerful and how can Vietnamese investors really maximise its magic?What is compounding and what drives it?Put simply, compounding interest (or returns) is the process whereby money earned from an investment builds upon itself over periods of time, as illustrated in the simple savings account example below:· You place some money on deposit in a savings account· You earn some interest on that deposit· Next year, you earn interest on that interest (along with retaining the original deposit)· The year after, you earn interest on the interest on the interest, and so on…Compound returns are driven by two factors: the rate of return being earned and the length of time your money is working for.Why you must secure the best possible rate of return?The rate of return determines how rapidly and by how much your initial… Read full this story
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