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Choosing the right assets depends on your financial goals, risk tolerance, and time horizon. Here are some common investment assets and their estimated average annual returns:
Compound interest is the process where the interest earned on an investment is added back to the principal, so that interest is calculated on the new, larger amount. This can significantly accelerate the growth of your investments over time.
Compound interest is the interest on both the initial principal and the accumulated interest from previous periods. It differs from simple interest, which is only calculated on the initial principal.
The power of compound interest is that the longer your money is invested, the more it can grow exponentially. Even small contributions can lead to large growth when compounded over many years.
For example, if you invest $1,000 with an annual return of 5%, after 10 years, you would have more than $1,600 due to the power of compound interest.