The Importance of Compound Interest & Reinvestment

Albert Einstein once said that “compound interest is the most powerful force in the universe,” or so the legend says.

Many times, the question arises of how we can get our capital to increase. As savers, we look for ways to make our money grow, but at the same time, that this process allows us to maintain purchasing power over time.

The reinvestment of your returns is the key to maximize your savings as much as possible. This concept arises when the interests are added to the principal, and therefore these interests also generate interest.

Put into practice the conclusion is quick: reinvesting the benefits of an investment continuously over time allows us to maximize our benefits. The more times it is applied, the more this process of interest accumulation accelerates.

Saving or accumulating money without investing means losing a great opportunity to achieve peace of mind while letting time pass.

compound-interest-percentage-savings-interest

In summary, with:

  • the time and
  • the interest rate, to which we invest our money.

The Compound Interest arises

At Housers we offer you the possibility of growing your savings over time thanks to the investment in tangible assets and the reinvestment of your profits.

BUY-TO-LET opportunities are your greatest ally. They meet the basic characteristics to take advantage of the compound interest:

  • Generate monthly income for the rent, in addition to the sale. This allows you to reinvest the profits constantly.
  • They are medium-term opportunities, linked to a tangible asset.

*To learn more about the benefits of our BUY-TO-LET opportunities click here.

Time and interest, the keys of the saver

Reinvestment can generate interest with the capital invested and also with the interest generated by this initial capital. That is, we get interest over interest.

The fundamental variable for this is time. In short, the more time for my investment, the more money it is possible to accumulate; by applying the interest rate on my initial capital multiple times as well as on the returns that I will generate I’m increasing my profits.

Graphically, the difference between reinvesting interests (and taking advantage of compound interest) and not doing so is very clear.

compound-interest-reinvestment-chart-benefits

These extra earnings can serve us to plan a trip, purchase a house, the planning of our retirement, etc.

For all these reasons, it is essential that part of our income be earmarked for long-term investments. At Housers we offer you different types of opportunities; both medium and short term so you can save and, above all, diversify.

The importance of saving for the future

The current situation is worrisome and therefore it is necessary to look for alternatives that allow us to reach our objective in the future.

The latest pension reforms threaten an uncertain retirement. A recent study led by Iratxe Galdeao and José Antonio Herce, economists of AFI, states that someone who retires today will suffer a fall in purchasing power of 350 euros a month on average throughout his retirement period.

The key is to be disciplined, with as little as two euros a day and an annualized return of 5%, in 35 years the figure of 67,000 euros is reached, a figure that according to the Spanish Association of Insurance and Reinsurance Institutions, is sufficient to maintain purchasing power in retirement.

Check out how Housers can help you get the most out of your money, go to Housers.com to see out latest investment opportunities.

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