How hard is your money working for you? The pros of compounding.

Maurice Cassan | 23 March 2017

“Compound interest is the eighth wonder of the world. He who understands it, earns it… he who doesn’t, pays for it.”

-       Albert Einstein

 

With compounding, any interest earned immediately begins earning interest on itself. It is a genius strategy based on a simple principle. So should we all be investing in this idea? Globaleye Wealth Expert Maurice Cassan explains how it all works.

 

 What is compounding?

 

“It is the eternal comparison of cash versus stocks. Cash does not outperform stocks in the longer term and therefore will effectively lose value in real terms, as inflation eats away at what are still flat-bottom interest rate returns. However, invest in stocks and you have set in motion a small action that will lead to bigger results over time.”

 

 How does it add up?

 

“Think of yourself as harnessing the power of a snowball. You start with a small ball, which continues to grow until it becomes a boulder.  Warren Buffet subscribes to this view, and who would argue with a man worth over $60 billion? Let’s look at the all share UK index stocks. Over the last 20 years, £15K became £55K, whereas cash would have only reached £20K. Compounding might take time, but it pays dividends in the end.”

 

I like the idea, but how do I know which investments have potential?

 

“The key to investing in funds with the most potential highlights the importance of choosing a high-caliber fund manager. Whilst the concept of compound interest is simple, the act of selecting stock can be complex. When you are choosing a fund manager, make sure you take into consideration their skills set and track record of market cycles.”

 

What should we have our eye on?

 

ÆON is the new buzz word round here and it’s easy to understand why it is causing such a stir. Here you have a platform that adapts to the changing horizon, preserving values when markets do the unexpected and catch people unawares. There’s no claim that it will achieve double digit returns, but what it does is take a realistic view of what is achievable based on the client risk profile.” 

To learn more, email enquiry@globaleye.com

 

Tags: Savings investing Compound interest

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