Compounding Can Be The Difference Between A Rolls Royce And A Camry

Compounding Risevest
Compounding Risevest

Peter and Paula just got out of university and landed good jobs in Lagos that paid them a decent ₦150,000 salary. They were both frugal with spending but were open to the idea of investing. They set a goal of investing $100 every month in 2021. After hearing about the dollar investment options Rise offers, they quickly set up an automatic deposit of $100 to go to a Eurobond plan as soon as their salary hit their accounts.

In December, they both checked their Rise account to see how well they’ve been doing. Sure enough, they saw the $1,200 they deposited all 12 months so far with a $56 return on top. They were both proud of themselves for sticking with their plan.

Peter felt he had worked hard enough all year and deserved a treat. The $56 return would be a nice addition to his Detty December budget. So he took the interest out and left his principal in his plan. Paula, on the other hand, decided to leave the interest invested in her plan.

The next year, Peter and Paula carried out the same tradition. Deposited $100 monthly into their investment plans, and in December, Peter took out his interest for the year while Paula left hers in.

After 10 years, Peter had $12,000 in his Rise plan while Paula had $20,500. They had initially planned to take out the money to buy themselves houses after investing for 10 years, but they’ve been doing so well at work and had just got bonuses that could pay for the houses they wanted, so they decided to continue with the Rise investment as usual and see what happens in the next 10 years.

After the next 10 years, Peter checked his plan and saw he had $24,000 while Paula had $75,000! Over 3 times what Peter had.

If they continued the same tradition for another 10 years, Peter would have $36,000 while Paula would have a whopping $226,000. Paula could afford to get herself a Ferrari or Rolls Royce with the gains she made from little $100 deposits every month, while Peter could get a brand new Toyota Camry.

Why did this happen?

Because Peter kept pulling out his return in December, he only had the total sum of the $100 he was depositing every year. And because Paula remained invested in her Rise plan, the capital she had kept growing. This meant the return she could get on her investment increased as well. You can view the full breakdown of the maths behind it here.

Rise

Investing is great, it puts your money to work. But staying invested is even greater. It increases the amount of money you have working for you. And the more money you have working for you for a long time, the more money you can get in the end.

While we know staying invested for the long term is a beautiful thing in the end, we know the journey can be difficult. That’s why we offer 3 tried and tested tips that’ll help you stick through the journey to the beautiful end here.

As the New Year kicks off, remember that a little Dorime here and there might be the difference between a Camry and a Ferrari in a few years 😉