Internet the Island of Manhattan provides a historical compound interest lesson

  • Internet the Island of Manhattan provides a historical compound interest lesson
    Independent.t. E.
    Between 108th and 109th streets in East Harlem is Peter Minuit. area. Every day after school, children from the nearby primary school the flow through the gate, spending the last drop of energy they had left. They play on the swings, chase each other around the yard and down the slide with glee. None of the children even a fleeting thought about the historical figure on the site was named after.
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Between 108th and 109th streets in East Harlem is Peter Minuit. area. Every day after school, children from the nearby primary school the flow through the gate, spending the last drop of energy they had left. They play on the swings, chase each other around the yard and down the slide with glee. None of the children even a fleeting thought about the historical figure on the site was named after.

Minuit. was a stout man with rough manners. He flirted with the sermon and diamonds, before accelerated Director of the Dutch West India company.

In 1625, he arrived in new Netherlands, Dutch colony that stretched from Delaware to Connecticut. But it will be in a year when his place in history would be strengthened – as the man who bought Manhattan island from American Indians for $24. At first, it seems that he paid button on the island, which is somewhat strange, given that the Currency was glass beads and trinkets.

Today in new York, it will be very difficult to buy a decent pizza and beer for $24.

In 2014, Rutgers University economists wrote an article rating the value of the land of Manhattan is 1.4 $trillion. If Minuit. was reading the newspaper, he would smugly laugh – but to decide who came out better in that the Internet is less obvious than it seems at first glance.

Suppose native Americans had a good financial plan. Knowing that the money was a surplus for living expenses, they have taken that $24 and invested it.

This kind of investment doesn’t matter. For simplicity, let’s say that these investments return 7pcs annually thereafter. Now let’s see why Einstein called compound interest the “eighth wonder of the world”. Compound interest essentially means that the extension 7pcs do you do each year is added to the core, making new 7pcs next year a little more. Many of the investments behaving in a similar way. Although this may seem obvious as soon as you add the magic ingredient of time, you can see how wonderful compound interest really is.

Ten years later, that same $24 gaining 7pcs year will double to $48. After 20 years, the Original investment had quadrupled to $96. A century later (1726) and the investment will be more than 1,000 times around 24,000$.

Today, that $24 investment would cost a staggering $8trn. To put this in perspective, all the wealth of the USA is estimated at $100trn.

In the end, Minuit. and friends have an asset worth 1.4 $trn and native Americans with their financial planning to have assets worth $8trn. Maybe not so bad in the end.

This example is extreme and no investor has almost 400 years, but there is great learning in it. The first lesson is that successful long-term investing is all about compound interest and time. Don’t let anything stand in the way of these vital components. The second lesson is that, when you have savings or capital sum to help. There are many high-quality financial planners that can help You find a solution that works.

Minuit. was on my way back to Europe in 1638, when he decided to stop in St. Kitts for some tobacco. The storm hit the boat, he was and he died at sea.

There is a third lesson for us all to find out, but for now, let’s think about his accidental contribution to the understanding of compound interest.

Will sparks investment Manager Quilter Cheviot; quiltercheviot.com/ie/private-client

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