As an investor or even a financially inclined person, one of the most important pieces of information for you to note is that the power of compound interest is second to none!

Despite how clearly obvious this piece of information might seem, it isn’t the most widely propagated/well emphasized in financial institutions as well as some schools across the country. However, if you are looking to create or build wealth through investment in multiple portfolios, harnessing the power of compound interest is one of the best ways to do so.

What is compound interest?

Now, under normal circumstances, when people are thinking of interest, they think of the extra money that is paid on loans. This type of interest could be rather discomforting because it means that you would have to give more money to your lender than you were initially given. However, it has come to be widely accepted in the financial world. 

Thankfully, the compound interest we’re referring to here has nothing to do with things of that sort. To put it simply, compound interest is the interest paid on the summation of the principal and interest garnered in the previous investment cycle. This is a step further than simple interest which only pays you extra money on the initial principal you invested. For compound interest to exist, you must’ve invested for at least two consecutive investment cycles.

Even we’ll admit that that might be a bit difficult to wrap your head around. So, let’s see if we can break it down further.

READ MORE: https://valourdigest.com/the-power-of-compound-interest-in-building-wealth/