A quick way to financial freedom Part 1spending money

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Think about the money you deposit in a bank. Banks can pay interest on the date of deposit. And the longer you agree to leave it there, the more willing the bank will pay. Why are you all wondering?
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The answer is what the bank does with the money after deposit. The answer is very simple. Loans for repayment at higher interest rates. This answer is correct, but not perfect. In fact, they don't just borrow money. They actually borrow up to 10 times your deposit. It has the advantage of leverage. The reason is that central banks only require banks to retain some of their loans. Currently it is 10%. When the bank approves the loan, the borrowed money is repaid to the banking system and a new loan is withdrawn. This happens until you borrow 10 times the original deposit amount.


Thus, banks are willing to pay interest on 2% of the loan, such as 6% if they can lend the loan 10 times. Pay $ 20 for $ 1000 deposit and get $ 600. Spending money is not bad. The more deposits a bank receives, the more loans it can lend and the higher profits and profits it can earn.
Well, there is nothing wrong or bad for a money-making bank. Indeed, for a growing economy, it is important that banks make money in their way. What many of us do not understand is that the same principles can be applied to increase the money supply. Just apply these principles to your investment.
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What banks do is leverage, or H. The money and speed of other people constantly moving this money and constantly increasing their profit base. People have the same options, but many are not aware of it. A simple example of interest rates shows how individuals can use bank money to increase wealth and cash flow.
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For example, suppose a person invests $ 20,000. Most investment advisers recommend this person to invest money in mutual funds and get a "high" return on the exchange. Suppose an investor follows this advice and invests $ 20,000 in a mutual fund. It also assumes that mutual funds perform well, with a seven-year annual return of 10% and that all returns from the fund will be reinvested at the same rate of 10%.
Seven years later, the $ 20,000 investor rose to $ 39,000, almost double the original investment. Most investment advisers (and most investors) are very happy with this return. In fact, given the volatility of the stock market, doing this successfully for seven years is very rare. The result is actually a compound interest test.
Next, let's see what happens if investors use leverage instead of increasing the return on this investment by $ 20,000. This example uses real estate for simplicity. You can use other investment instruments, such as stocks and stock options, but you know all leverage in the real estate sector.