If you could ask anyone for the best financial advice, who would it be? You could do worse than to have a chat with Albert Einstein who, whilst known for his scientific capabilities more than his financial acumen, once remarked that ‘the most powerful force in the universe is compound interest’.

Compound interest is indeed one of the smartest ways to watch your money grow over time, and it’s a simple concept.  

1.     Wealth = Money + Time

When you invest your money, and however you invest your money, you will likely be in receipt of a return on the investment in the form of interest or dividends.

In the first year of your investment, you get the interest relative to the volume of the investment alone. However in year two, if you reinvest the interest from year one then you earn the second years interest based on the original investment plus the interest earned.

To put it another way, your interest is now starting to earn you interest. It is like a free money generator, and anyone can do it. So simple, a child could do it, and in fact they are the people best placed to benefit.

2.     The Earlier You Start The Better It Gets.

The earlier you start to invest your money the earlier you can start to accumulate wealth due to the snowballing effect of compound returns.

You only need to start investing a little to benefit from this process over time, but the earlier you start the better. Time is once again one of the greatest tools available to the intelligent investor.

3.     What’s In A Percentage?

In the case of compounding a small percentage difference in the annual rate of interest on your investments can make a difference over time.

The difference between an annual rate of interest of say 6% and 8% over 35 years can be huge. The mission is therefore to maximise your return on your investment to ensure that as an investor you are fully exploiting the amazing money making potential of compound returns.

Get some expert independent financial advice and use resources like www.unbiased.co.uk to locate a financial adviser who will be able to guide you to the best financial solutions for you.

If just about the smartest man who ever lived regarded the process of compound returns in awe, any investor would be a fool to ignore the possibilities of compound returns.

Jamie E Smith is the author of Making Money From Stocks And Shares

This content was provided by one of our users, Jamie