EN 
ZH 
[Buffett Tips] What is the compound interest effect? Buffett became a stock god thanks to him! Reveal the secret method to achieve wealth and correctly use the power of compound interest effect! Make you tight on money wherever you go
Have you ever heard of Buffett’s ten-year showdown with fund managers? In 2007, Buffett launched a $1 million challenge. What was this challenge? Starting from January 1, 2008, in ten years the return of the S&P 500 Index will be higher than that of all hedge funds. What is the S&P 500 Index? It covers almost the 500 most powerful companies in the world, among which Apple, Amazon, Google, TESLA, etc. account for the largest proportions. Let’s talk about hedge funds, also called active funds, which are a group of fund managers. Reasonable funds! Buffett's point of view is that the returns of active funds in the short term of one or two years may be higher than the S&P 500, but if the time is extended, the returns of the S&P 500 Index will be higher than those of funds managed by fund managers. After Buffett published this theory, many fund managers objected, but no one accepted the challenge. Until finally, a fund manager named Ted Seides accepted the challenge. Who won in the end? Let's sell it first! After reading this, you will have a different perspective on investment and financial management!
After hearing this, do you think Buffett will lose? But every year after that, the index fund selected by Buffett beat 5 active funds. In 2015, the index fund selected by Buffett finally overtook it, and the gap became wider and wider. By 2016, Ted Seides took the initiative to admit defeat. In the past ten years, the active fund has earned US$220,000, with an annual return of 2.2%. The index fund selected by Buffett has earned US$850,000, with an annual return of 7.1%.
It is not easy to underestimate the difference of a few percent. Although the difference is not large, if the time is extended to the past ten years, the compound interest effect will create a 4 times difference. Think about it if we extend the time further. How about stretching it to 20 or 30 years? This is the power of the compound interest effect! In fact, Einstein said that compound interest is the eighth wonder of the world, and their power is amazing! What is compound interest? It is a method of accumulating wealth over time. It means that after a certain income is reinvested, the interest is incorporated into the principal and continues to accumulate interest, generating more income. Interest begets interest. To put it bluntly, money makes money. .
In fact, many people know this open secret. I know you know it, and Buffett knows it. Time and compound interest are a common method used by many people to accumulate wealth, but it is also a challenge. Just believe in time and numbers. In fact, it is It is a test for long-term investors. Just imagine if you were Buffett, in the first year of this challenge, when you encountered a financial tsunami and the performance of index funds lagged behind, would you be strong enough to continue holding it for a long time? Many times, people usually want to make quick money and lose their determination, or some people may say that the principal is not enough, which makes the time ineffective. So you can read this article about borrowing money to earn interest differences to leverage your life. piece.
As for those who are new to investing and want to start but don't know what to buy, you can start by buying a dividend-paying fund that pays 8% dividends, or buy an ETF of the S&P 500 index. If you have any questions, feel free to pm me. Here is my facebook messenger link for everyone! Or if you have other better ideas, please leave a comment below and let us grow together and make money together!
Speaking of which, it is almost the same. If you have not opened a securities account, you are welcome to follow the link below to open an IB account. It has low transaction fees and an advanced trading platform. You can buy stocks, futures, foreign exchange, bonds and funds. Finally. Put on a helmet first, these are my personal opinions, not investment advice, investment involves risks! Everyone should think independently!
Interactive Broker free account opening link:Click here
