Compound interest occurs when the interest you receive will continue to add up to the original capital to continue to earn interest in the next period (Different from normal interest: Fixed interest based on the original principal amount). This helps you use the power of time and capital to maximize your return.
Formula to calculate compound interest:
FV = PV*(1+i)n
- FV (Future Value): Total value at the end of the interest period
- PV (Present Value): Initial value
- i (Interest): Interest rate per period
- n: Number of interest periods
The following example will show the overwhelming power of compound interest when compared to simple interest. Suppose you have a capital of 1 billion VND and want to choose a good profitable channel.
Here is the comparison:
|Simple interest 9%/year||Compound interest 9%/year||Gap|
From the above example we can see: Thanks to the power of exponential functions, compound interest will bring huge profits over time.
Why compound interest?
Because the value of compounding is tied to time, the power of compounding is present in every aspect of your life whether you know it or not. Therefore:
- If you make good use of the power of compound interest, you can reap great benefits.
- On the contrary, if you don’t know how to take advantage of the power of compound interest, at the same time you’re missing out on a great deal.
- Even if you have a loan with parent interest (loan interest is entered into the principal to continue calculating interest for the next period), you will have to bear a “compound loss”. Compound loss is as powerful as compounding, but in a way that works against you.
How to take advantage of compound interest?
- Start as early as possible, because time is the most important factor in the power of compounding.
- Buy good stocks, which give you periodic dividends and share value also increases over time.
- In the crypto market, look out for platforms that pay interest while you hold the token (staking and earning).
- Conscious of compound losses. Prioritize early settlement of interest-bearing debts.
- Exclusively for ONUS app users: Currently, the Daily Staking feature is an effective compound interest channel for ONUS app users. When you store from 50,000 VNDC on ONUS app, you get compound interest 0.033% per day, equivalent to 12.79% per year. Interest is paid daily, accrues to your account and continues to be charged for the next day.