My regular roundup of the week’s blog and financial site links.
I think you can divide the world up into people who have a spiritual epiphany when they learn about compound interest, and those who just shrug and buy more tat on their credit card.
When I first learned about compound interest, my life changed forever. I won’t say it changed for the better – saving half your income and writing a blog about it isn’t a surefire way to win over the ladies – but after 20 minutes playing around with a compound interest calculator [1] I was an investor for life.
Weirdly, I’ve still not written about compound interest on Monevator, despite it being one of my favorite dinner party conversations.
Instead, this week I wrote about making money on the iPad [2], rebalancing and taxes [3], and new ETFs for Australia, Canada and South Africa [4], which means another week went by without my penning a love letter to the miracle of escalating returns.
But Investor Junkie, a US blogger, did cover the power of compound interest in his post How much is 1% costing you? [5], so it’s my blog post of the week.
He writes:
“I find compound interest pretty amazing. It’s believed Einstein once said compound interest “is the most powerful force in the universe”.
Too right. Einstein, me and Investor Junkie, all united by the enigmatic charms of compound interest.
The point of his article is to show how a difference of just 1% can damage your long-term returns (let alone the 3% or more a blood-sucking financial adviser [6] could be leaching out of your retirement fund).
Just check out the following table to see what a difference 1% makes:
| Years | 8% Return | 7% Return | Difference | % Difference |
|---|---|---|---|---|
| 5 | $58,666.01 | $57,507.39 | $1,158.62 | 2.0% |
| 10 | $144,865.62 | $138,164.48 | $6,701.14 | 4.6% |
| 15 | $271,521.14 | $251,290.22 | $20,230.92 | 7.5% |
| 20 | $457,619.64 | $409,954.92 | $47,664.72 | 10.4% |
| 25 | $731,059.40 | $631,490.38 | $99,569.02 | 13.6% |
| 30 | $1,132,832.11 | $944,607.86 | $188,224.25 | 16.6% |
New UK credit report site
Finally, Jessica from Credit Report [7] wrote to me to flag up her new UK site that offers all kind of advice about maintaining a decent credit file. 99% of such emails are spam, but this site looks like the real thing and has plenty of good advice.
More highlights from the personal finance blogs
- Buffett the dividend investor – Dividend Growth Investor [8]
- Would you sell this home and plan your retirement? – Wealth Pilgrim [9]
- Does renting make sense? – Get Rich Slowly [10]
- Hyperbolic discounting and you – The Amateur Financier [11]
- Being wealthy is only a feeling – MoneyNing [12]
- High earners and high income taxes – My Journey to Millions [13]
- Discount shopping on a schedule – The Digerati Life [14]
- Someone always farts in a crowd – Financial Samurai [15]
Other interesting financial and money articles
- Commercial bankers whine to Peston about bonuses – BBC [16]
- …while central bankers whine to his chum about bankers – BBC [17]
- Time to buy listed private equity funds? – FT [18]
- Investors warned about lifestyle funds – FT [19]
- Multi-asset investing strategies – The Independent [20]
- Pimco is exaggerating threat to gilts – The Telegraph [21]
- Nationwide: UK house prices to rise 10% – The Telegraph [22]
- The iBook of Steve Jobs – The Economist [23]
- Mining the FTSE for bargains – The Motley Fool [24]
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