In this series, I explain How to Start Dividend Investing With Confidence and leverage the power of compound interest:
Here is a quick explanation of why you should consider dividend investing.
Dividend Investing is one of the best ways to build wealth over the very long term.
However, succeeding requires proper knowledge, patience and discipline. You need to implement a plan and stick to it over a very long time. It’s anything but a get rich quick scheme. In fact, it’s a get rich slow scheme.
In a nutshell, dividend investing allows you to take advantage of the power of compound interest.
Compound interest is “is the interest on a loan or deposit calculated based on both the initial principal and the accumulated interest from previous periods“. In the words of Benjamin Franklin: “Money makes money. And the money that money makes, makes money“. It’s so powerful that Albert Esintein dubbed it the “Eighth wonder of the world“.
Here is a quick simulation to help you grasp the power of compound interest.
If you deposit $1000 in a dividend paying product, which compounds at 7% annually, and contribute $100 per month over 30 years, you’ll end up with $120,965.20. Of that total, you contributed $37,000 and generated $83,965.20 in interest!
As you can see, it takes more than 10 years for the power of compounding to kick in. After year 20, the returns far outweigh the contributions. That’s why you need to be patient and disciplined.
Enjoy the series and stay tuned because I will regularly update it.
DISCLAIMER: This article is the fruit of my personal research and should not be viewed as financial advice. I enjoy analyzing stocks and providing investment ideas but I highly encourage you to conduct your own research before investing in any asset. NEVER invest without having done proper due diligence and NEVER invest out of the Fear Of Missing Out (FOMO). Also, NEVER invest because some internet message boards are hyping up a high-flying stock. As a rule of thumb, the number of rockets included in a tweet are inversely proportional to the quality of the advice given.