Sunday, 23 May 2010
Saturday, 22 May 2010
- U.S. government
- Government agencies
- zero-coupon bonds
- Stable and predictable; unlike stocks - A Bond price doesn't go up and down like Stocks
- On the maturity date you will get the capital back + all the interests you have already received
- You can sell your Bonds to other investors which means you can raise cash if you need to
- Investopeida's Bond Basics: http://www.investopedia.com/university/bonds/
- http://www.smartmoney.com/investing/bonds/ useful tools and information for Bond investors
- How to Calculate Gross Redemption Yield: http://www.ehow.co.uk/how_5951552_calculate-gross-redemption-yield.html
Sunday, 9 May 2010
Compound interest can be calculated with the following formula:
FV = PV (1 + i)^N
FV = Future Value (the amount you will have in the future)
PV = Present Value (the amount you have today)
i = Interest (your rate of return or interest rate earned)
N = Number of Years (the length of time you invest)
Assume you have £1000 and you want to invest it for 10 years. You found an investment with 10% return, so after this period what will you have? £1000*((1+ 10%)^10) almost £2,600
If the interest was 0.05%, then after 10 years you would have almost £1,630.
So, in the former example you would have £1600 interest whereas in the later only £630 which is slightly above third of the former although the later interest rate was only half of the former.
Now, imagine you'd save £1000 every year for 10 years and each year the interest rate would be 10%.
How much will you have at the end of the 10 years?