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This episode is going to talk about the "Miracle of Compound Interest". Financial advisors constantly use compounding interest calculators to project and predict future values for their clients. The problem with that is that stocks, bonds, and mutual...
This episode is going to talk about the "Miracle of Compound Interest".
Financial advisors constantly use compounding interest calculators to project and predict future values for their clients. The problem with that is that stocks, bonds, and mutual funds don’t compound interest. In fact, no investment does. Stocks don’t compound interest. They appreciate and they depreciate in value. That’s not the same as compounding interest.
Understanding this truth also sort of demolishes the entire use of the phrase, “the miracle of compound interest” (supposedly by Einstein), as it relates to investments. It’s simply not applicable. Compound interest calculators, therefore, are generally used as a marketing tool to sell investments. They are not real predictors of what is going to happen and are generally a bad way to choose an investment. Calculations and projections are not a good substitute for real knowledge about an investment.
Curtis’s motto is that what you learn today and how you position yourself will determine your future financial well-being 5, 10, 20 years from today. To learn more about how to manage your wealth in a practical way, visit www.practicalwealthadvisors.com
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