# What is Compounding Interest & How to Win

This is the most powerful phenomena to growing wealth if used appropriately. It’s so powerful that in just 30 days, it would turn one penny into over \$5 million. And in this video, I’m going to unpack exactly how to maximize this exact phenomena that I am talking about. Without further ado, let’s get straight to it. Welcome if you’re new to the channel. My name is Matt Jimenez, and I’m an entrepreneur who has worked with the greatest minds in finance over the last several years. I’m here to pour into you guys everything that they’ve poured into me. This video is all about the eighth wonder of the world, and this Eighth Wonder of the world is called compound interest. Einstein once said, “He who understands it earns it; he who doesn’t pays it.” And in this video, if you are in a position where your money is compounding for you, I want to touch on exactly how to expedite that. Not only increase your returns but make sure that you are getting the most squeeze for every dollar invested in whatever is yield-building your compound. And I’m also going to tell you exactly how if you’re not earning with compound interest, you’re actually most likely paying some type of compound interest.

First, we need to understand exactly how it works. To put this simply, compound interest is the concept that your money will earn money for you through interest over time. And as humans, it’s really hard for us to understand exactly how powerful this is. And I want to show you this exact chart. We’ve all seen the chart of a penny turning into \$5 million. Now, how exactly does this happen?

Whenever you invest money into an instrument that has a compounding effect, the principal is continually earning more through interest. And now the principal is greater, and the percent interest amount is now greater, yielding returns on the original investment. Now, let me simplify that. Let’s say you have \$10 in an account, and it grows by 50%. So the new 50% that will be earned will be on the new balance of the account, which is \$15. So the percent earned is gradually increasing as the size of the account increases. That is basically the concept of compound interest.

The principal is continually growing, so the percent earned is continually growing alongside it. As the balance increases, so does the amount earned. Look at this example here. This is a penny that has doubled every single day for 30 days. So a double is basically 100%. By day two, you would have two pennies, and it doesn’t seem like much because you’re looking at the dollar amount. This is one of the biggest pitfalls when it comes to investing. People always look at amounts. What you really need to be looking at is percentage amounts. A lot of times, this is exactly how people are fooled into thinking somebody makes so much money. It may or may not be a lot of money relative to its account size…
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