In the last articles, you have learned about how to know your financial position at this time. And so you’ve learned about how to set up a Family Budget.

Now, you may decide to make investments to increase your property value. From the number of possessions you have, you may have some idle money can you invest. From the financial budget, you may also have approximately $ 300 thousand per month that can be invested.

The problem is, you probably know how to calculate the benefits of investing. Many people who invest, but do not know how to calculate the profits he had got.

To find out, you need to learn about the concept of interest. The concept of interest often referred to as the concept of  investment return.  Both have the same principle.

Let us take an example, let’s say at this point you have funds amounting to 1 million. You go to the bank, to meet its service customers, and express your intention. He said that the bank will impose an interest rate of 12 percent per year if you open a deposit on it.

Now, we will calculate how much interest you’ll get at the end of the year, and how the balance of your investment if you let alone rotates investment for ten years. For that, there are several options of interest:

1. Simple interest
2. Compound interest

Compound interests can be divided with:
* Yearly compound interest
* Monthly compound interest
* Daily compound interest

I’ll show how to calculate for each of the interest system. Like it or not, I think it would be very important if you know it.

Simple Interest
If the bank uses a system of simple interest, then at the end of the first year, you’ll get interests rate:
$ 1 million x 12 percent = $ 120,000.

At the end of the second year, you will get interests rate:
$ 1 million x 12 percent = $ 120,000.

At the end of the third year, you will get interests rate
$ 1 million x 12 = $ 120,000.

And so on, until after ten years, you will get a total interests rate: $ 120.000 x 10 = $ 1.200.000.

Thus the balance of your investment will be: $ 1,000,000 (initial funding) + $ 1.200.000 (total interest) = $ 2.200.000.

Simple, right? Hence, the interest calculation system is called simple interest.  The next article I will explain about compound interest. Hopefully this explanation can be useful.

Related posts:

1. Calculate the Growth of Investment Funds (2)
2. Calculate the Value of Investments Based on Interest
3. Three Most Feared Investment Risks

Whose name must be no risk investment? Well, from my experience so far, usually only three the risk of the most feared people when they invest: 

1. The fall in value of Investment

The most feared risk when investing in general people are “Will my money be lost?” Most people might answer “no” when asked like that. Lovable, where there is, still people who want to lose money? However, the problem, whose name must be in the risk of each investment. Only difference is in size. There is a risk investment products large enough, there was, there was a small one. It may need a special discussion on NOVA future numbers. Clearly, one of the most feared men, once again is: “Will my money be lost?”

Okay, now if you invest, how much reduction in the value you are willing to bear if you experience a loss? 10 percent? 30 percent? 50 percent? Or 100 percent? Regardless of how much loss you are willing to bear, remember, it is part of investing. Do not ever expect you will continue to profit. If not experience, yes not learn, right?

2. Difficult it was for sale the Investment Products

The second risk of the most feared man when investing is whether the investment product that is easily bought for resale. Some people may be happy to invest in gold because gold is easy to sell again. However, there are also people who invest in U.S. dollar currency, and the dollar is quickly incorporation into the bank. This is because when the dollar was kept in the closet, then the physical condition of paper money may be decreased, and it will sometimes make it difficult if one day the dollar was about to be sold again. Understandably, some banks often do not want to buy your foreign currency when the conditions of the paper money was torn, damaged or worn.

Another example of an investment product that is not always easy for resale is goods collection. Collectible items are not always easy to sell again because buyers market these goods is very specific. Painting for example, because of the specific market, not always easy to sell the painting. But, once sold, could be a very high price and provide a considerable benefit for people who sell them.

So, before you decide to invest, first know how easy your investment products can be sold again. Do not let you invest but cannot sell it, because things are difficult to sell.

3. Investment returns less than the increase in goods and services

Imagine if you invest in time deposits that provide 10 percent interest a year, whereas prices in one year instead of goods and services rose 15 percent? This often happens, not because of too high prices of goods and services, but because of the selected product itself is not necessarily appropriate.

Yes, some of you may want a safe investment products and conservative. However, the consequence is that the investment results obtained might not be able to match the rising prices of goods and services. If it continues you experienced from year to year, then you will go broke.

What should you do to deal with this risk? Do not shut down the information. Learn the products other investments that you might not know, and then try to go in there to consider all the consequences. Over time, you must be able to overcome the high prices of goods and services by investing in products that are potentially able to provide higher yields than the increase in prices of goods.

Happy investing!

Related posts:

1. Calculate the Growth of Investment Funds (1)
2. Calculate the Growth of Investment Funds (2)
3. Formulation of Financial Planning on Trade Business