The key for all successful investments... But with patience!

I consider myself a person who likes taking risks

Big risks, because life is short, isn’t it?

When I invested for the first time in a stock, I’d put all my confidence into that its value won’t drop (something impossible)

Unironically the first week after investing 3 euro into Stellantis stock, it started dropping like it never did before.

Everyday my portfolio would look red, losing hope every minute that passes

If you recently got into all this investing thing, I think you may relate to this.

Some people who invested into the same stock would tell me to have patience, that soon it’s going to be up

And they were right.

I almost sold it

But after a long week, the stock started doing incredibly great.

Then, I remembered something.

Compound interest.

Let me tell you something if you are new to investing; Goal you should be looking forward on is the long-term investing.

Not just for the short term, as it is more possible that you just lose your money.

The market (especially U.S stocks) are likely to go up… But in a period of let’s say 10 years.

It’s actually pretty simple.

You invest periodically during 15 years = You might get a lot of profit

You invest once in a while for a few weeks and then sell it = You will likely not get much profit, and even lose it.

But, what the fuck does compound interest mean?

Took me a while to understand it, and I will explain it to you by the most simple way (so that you understand it quickly, unlike me)

Imagine that you are not broke and you have $1000

You want to do something important with this money, so you invest it into an index fund which gives around 10% of rentability per year.

You invest your $1000 and the next year you get the 10% of your money, which is 100; Now you’ve $1100.

What would you do? Sell the index fund and spend the money you’ve gained in “something more important”?

This is where most investors fail at.

Now, as you are a Business Media subscriber (meaning that you are smart), you will grab your $1100 and reinvest them into the index fund again, and leave them for another year.

Next year you’re getting the 10% of $1100. which is 110 ($1210)

What’s next?

You’ve guessed it.

If you continue reinvesting the profitability that you get each year… In 30 years you will have…

Correct!

$181.943,42

(Without counting a monthly deposit)

In basic terms, it is just the accumulation of the profit you make (in a year) of an investment into the original capital, which ends up growing as an increase rate graph, unlike simple interest which consists of linear rate

So, now you know why it is better to leave your damn money and grow it with patience rather than short term investing and having a small chance of making benefit.