How To Calculate Compound

How To Calculate Compound

We prefer to think of compound interest as a reverse credit card. We all know the problem with credit card debt; the interest charged makes it difficult to pay off the original, or principal, debt. Well the benefit of compound interest is that it can help you make money the same way credit card company’s do. In this article we will teach you how to calculate compound interest, and show some examples of how you can use it to your advantage.

Compound Interest Formula

Keep in mind when using this formula for compound interest that it is an annual calculation. The formula for compound interest looks fairly complicated, but its actually quite simple. Lets explain the variables in the compounding formula:

A – Amount (The future value of the loan)

P- Principal (The initial deposit amount)

R- Rate Of Interest (The annual interest rate)

N- Number of Compounds Per Year

NT- Time In Years (total years the money is invested for)

When looking at the number of compounds per year, remember you can have interest compounded monthly, semi annually, quarterly, or annually.

The Gage Canadian dictionary defines compound interest as, “the interest paid on both the original sum of money borrowed and on the unpaid interest that has accumulated.” Sound like something you’ve heard before?

Lets look at compound interest a little closer

Here is an example of how to calculate compound interest with a few numbers rounded off to make the calculations easier. You have $1000 dollars and open a savings account at a modest 3 percent per annum interest rate. That is you lend the bank $1000 dollars and they pay you 3 percent interest on this amount of money annually. It’s a far cry from the 19.5 percent a credit card company charges, …

How To Trade Stocks – Trading Styles

How To Trade Stocks – Trading Styles

If you have no prior experience in investing and finance management, you might be surprised by the enormous amount of learning needed in order to learn how to trade or invest. One of the most important things you need to grasp is a solid understanding of your own trading personality, investment philosophy and objective. Knowing these things will help you determine why you trade, how you trade and what you trade. It will also insure that your trading does not interfere with your lifestyle and general well being, which can help achieve better trading results in return. This chapter will take a deep dive in discovering a trading style that is customized to your personal requirement.

When evaluating your trading style, there are usually a few main factors to consider and we’ll go through each one of them carefully.

1. Risk Adverseness – Risk adverseness essentially refers to how well you are able to take your losses. This concept is different from risk management where you are expected to go into the technicalities of how to control risks. Before you start learning how to trade or invest, you always need to find out what is the amount of money you are comfortable with losing. In other words, how much margin/buffer are you allowing yourself for failure? In reality, nobody goes into a trade or investment, expecting to win 100% of the time. The key to profitability is how you react to losses and bounce back even stronger thereafter. Understanding your appetite for risk will also help you choose the type of instruments to trade, be it ETFs, Forex, Options, Stocks, etc.

2. Time Availability – Do you have a day job? Do you have a family? What kind of lifestyle do you lead? …