Syndicate
Analyzing Growth Impact
In the following example we will analyze the impact of growth that a capital is able to have when it is placed in greater interest rates than that of the financial system. Let us suppose that a person started to work at the age of 25. Today this person is 45 years old, and his family situation is consolidated, and his work life during the past 20 years has allowed him to save up monthly amounts according to the discussions previously made. The capital that he disposes of for his stock project is of $100,000. If the person in our example is 45 years old, the reasonable horizon for the exercise would be a fixed term of ten years. For this expel we will take a real monthly rate of 3 percent. According to the results we will be able to figure that at a rate of ten years, the multiplicative power of the capital would be that of 35 times. In other words, if the initial capital of the person in our example were of $100,000, at the ending of ten years he would obtain a capital of $3,500,000. Just out of curiosity, let us calculate how the initial capital would vary if we were able to achieve a real monthly rate of 3.5 percent instead of 3. According to the results we would be able to see that in a time frame of ten years the multiplicative power of the capital would be 60 times instead of 35 times. Therefore in this case, at the ending of the period it would be of $6,000,000. When one already disposes of a great amount of capital like in our example, he will be in the average to be able to yield, a fixed or variable rate in the system, so as to be able to live in abundance on his own. This is obviously just a fictitious mathematical figure, but it is absolutely correct. Perhaps in reality the results are below this, but the important thing is to understand that is it totally feasible and can be done by anyone who sets their mind to doing it.