Compound interest is an amazing thing, and it is awesome that you are already thinking about it so early. A lot of people wait much too long to get started, but check this out:
FV = $8,600 X (1 + 10%) ^ 50
FV = $1,009,561
If you were to invest $8,600 today into a mutual fund earning 10% compound interest per year (equal to the historical rate of return from the stock market), then you would have over $1 million dollars by the time you are 65. Pretty amazing!
You have two options to get started. You can follow the Do-It-Yourself approach or you can hire a financial advisor to help you get started. If you do it yourself, shop around online for a mutual fund company or brokerage firm to open an account with. Popular companies include Vanguard, State Street Global, Scottrade, and many others. Otherwise you can go to your bank and ask to visit with a financial advisor.
One more thing!! Since you are under 18, you will unfortunately need a parent or guardian to act as a "custodian" on your account. Once you are over 18, the account will be all yours.
Well most interest rates are very low right now. A basic example would be a certificate of deposit from a bank. These usually compound monthly, but with rates as low as they are now, a fixed interest rate just does not seem to be a worthwhile investment in terms of getting a return. An example, at any major bank the interest rate will be around 1% for a 5 year CD. The APY will only be negligibly higher.
An example is like this:
You lock up $200 for five years in a CD paying a 1% rate compounding monthly.
200 X ( 1 + (.01/12)) ^ (12 X 5) = $210.25
That is a $10.25 return after 5 years.
You can look at investments and look at their fixed interest rate. You can do the equation above to find your return.
Hi, my name is Jason, I am 15 years old. I have been reading articles about 'Compound Investments'. I feel like this would be really cool, but there is one problem. I don't know where to start, I don't know how nor where to make an account to start investing. How do I start an account, and who do you think would be a good provider for compound interest.
