Lessons From A Penny Pro

Compounding Returns For Traders

We all know about the classic long term investment strategy called buy and hold…

Warren Buffett is one of the wealthiest men in the world and the billionaire all billionaire’s aspire to be. 

No question about it, Mr. Buffett knows how to invest in stocks, the man will go down in history as a legend. 

Buy and hold is great if you have decades to sit on a stock…but what about us? We don’t have decades to wait—we need results now.

So what exactly can we learn from the Oracle of Omaha if we’re trading a small account?

The power of compounding returns.

I’m stealing a page out of Warren’s playbook to school you on how to take a small account and turn it into something real… by using the powerful forces of compound returns.

 

The Power of Compounding

 

When it comes to calculating interest, there are two basic choices: simple and compound. 

Simple interest is calculated as a set percentage of the original principal every year.

The way I like to describe compound interest is “interest on interest.”

This creates a powerful effect on wealth creation… and the reason many investors are so successful.

When you are able to  make “interest on interest,” capital will grow at a faster rate than simple interest, which is calculated only on the principal amount.

How does it work? 

Let’s look at it from a trader’s perspective…

Simply put… you continue to reinvest your returns, as opposed to taking them out…

Let’s say you invest $10,000 at a 10% simple interest. At the end of the year, your investment capital is now $1,000 higher ($11,000)…

If you take the $1,000 out, or don’t reinvest it… then you make 10% the next year, you make another $1,000… continuing on this way, you are building your wealth by $1,000 per year…

$10K isn’t going to take you very far following this method. 

Now let’s say you are compounding those returns instead…

The first year will actually be the same… 10% return on $10,000… you now have $11,000.

Now here’s the difference… instead of taking the $1,000 out of your account, you continue to invest it along with your original $10,000… 

In year 2, you now make 10% return on the original $10,000 and the $1,000 as well (interest on interest)… so instead of a $1,000 increase, you now have an $1,100 increase…

Doesn’t sound like much does it?

This is where it gets good…

Over time by continuing to reinvest and compounding those returnsthe capital begins to increase exponentially.

Just take a look at how simple and compound interest compare over a 50-year period:

 

 

The blue line shows where you would be by compounding your returns on $10,000 over 50 years and the red line shows the capital you end up with when simply making a 10% return every year on the original $10k only…

You may be surprised at how quickly this can add up. At 10% simple interest, your $10,000 investment would be worth $60,000 after 50 years…

However, here’s where the incredible effects of compounding comes into play… by compounding your returns, your capital would balloon to more than $1,000,000 in the same 50 years…

Just look at Warren Buffett… over the past 50 plus years, a $10,000 investment in a low-cost S&P 500 index fund would have grown to over $1.2 million…

But with the superior stock picking of Warren Buffett along with the compounding effect… the same $10,000 investment would be worth around $200 million… WOW!

That’s the power of sustained outperformance while compounding returns along the way, and is the primary reason Warren Buffett is one of the world’s richest people today.

If that doesn’t convince you… stop reading… but if you want to amass true wealth, let’s get into it…

You don’t have to start with a lot of money… and you don’t need a time machine to go back to begin at a younger age…

I use penny stocks to stack gains and compound them on the daily

Should you have long term investments?… absolutely… I sure do…

But if you are late to the game, or want a great kick start… this is what i do

I developed a strategy that lets me capture great returns every day and week… and then I stack my gains by compounding those returns each week.

In fact I have created a small account challenge to prove it…

I start with anywhere from $500 to $5,000 and from there I let my returns compound by keeping them in the account and continuing to make gains on gains… over and over…

In my last challenge I took a tiny little $500 account and in just 58 trading days I was sitting on $10,758.*

How?

Well I use the power of compounding my returns…

Starting with a small amount, I make trades using my Profit Prism strategy and every time I bank a gain, I leave it in the account.

So now I am trading with more money, allowing me to take bigger size on my trades, and effectively compounding those returns…

If you need a place to get started, check out this training video.

It’s packed with great information to get you moving in the right direction.

 

 

 

*Past performance is not necessarily indicative of future trading results, and the results presented in this communication is not necessarily indicative of future results, and the results presented in this communication are not typical. Investing in securities is speculative and carries a high degree of risk; you may lose some or all of the money that is invested.

 

 

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