MOSCOW, April 6 – RIA Novosti. If you constantly increase the initial investment amount, new returns will be accrued for a larger amount, accelerating the growth of profits. This is the very compound interest (reinvestment), Andrey Rusetsky, asset manager of BCS World of Investments, told the Prime agency. “Compound interest is an integral part of any reasonable investment. On deposits, interest can be capitalized, for example, at the end of the investment period. 1,000 rubles at 5 percent, in a year you will receive 1,050 rubles, and new interest will be charged on the already grown base of 1,050, and then the actual amount in two years of investment at 5 percent will be 1,102.5 rubles, ”the expert proves.
According to him, compound interest is effective in highly volatile and highly profitable instruments. It should be used when calculating long-term investment.
“If you withdraw interest from an account, withdraw coupons and dividends, then on a long horizon you lose to those investors who remain in the market. For simplicity, we can advise using the” rule 72 “: divide this number by the average annual expected return and get the term in years , for which investments will be doubled with the help of compound interest “, – advised Rusetsky.