The power of compound interest– it only works on paper not reality
You can google this and you find so many articles tell you the power of compound interest and how it works. Ok, I have to smash this big fat lie.
This is perfect example of lie, damn lie and statistics
You can google this and you find so many articles tell you the power of compound interest and how it works. Ok, I have to smash this big fat lie.
This is perfect example of lie, damn lie and statistics
Let’s me explain why it never works like paper said
1.You won’t be able to have consistent return every year. The reality is the more consistent you want, the lower return you will have. 10% per year and every single year, well, you should go to bed and dream about it.
2.It is impossible you will constantly contribute the additional fund into your investment. Over 80% investors will do that to their property (because they are forced to) but they won’t do this to their stock portfolio, particular when time is tough. Ask yourself, do you buy more stocks in 2008-2009? I bet you didn’t.
3.You will definitely withdraw the fund out of your stock portfolio due to your personal circumstance (oversea travel, buy car, wedding, buy house…etc). The calculation on the paper never includes the withdrawal, which is huge flaw.
4.You totally miss out the investment expense fee and tax. After all fees and tax, you will find out the power of compound interest is destroyed by compound expenses and tax.
It doesn’t mean you should never invest. Instead, you should invest early but with right expectation (receive market return only).
1.You won’t be able to have consistent return every year. The reality is the more consistent you want, the lower return you will have. 10% per year and every single year, well, you should go to bed and dream about it.
2.It is impossible you will constantly contribute the additional fund into your investment. Over 80% investors will do that to their property (because they are forced to) but they won’t do this to their stock portfolio, particular when time is tough. Ask yourself, do you buy more stocks in 2008-2009? I bet you didn’t.
3.You will definitely withdraw the fund out of your stock portfolio due to your personal circumstance (oversea travel, buy car, wedding, buy house…etc). The calculation on the paper never includes the withdrawal, which is huge flaw.
4.You totally miss out the investment expense fee and tax. After all fees and tax, you will find out the power of compound interest is destroyed by compound expenses and tax.
It doesn’t mean you should never invest. Instead, you should invest early but with right expectation (receive market return only).
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