Diverse Investments: Do They Dilute Interest Earnings?

The number of investments you have doesn't necessarily affect the interest you earn. However, the interest rate does. A higher interest rate means you'll earn more on an initial investment. Some investments offer compound interest, where the interest earned in one period is added to the principal investment, and then interest is calculated on the new total. The more compounding periods your money experiences, the larger it will grow.

Combining accounts

Combining multiple investment accounts can have its advantages and disadvantages. On the one hand, it can reduce the number of periodic statements you receive and the number of things you need to keep track of. It can also reduce per-account costs, which can add up to significant savings if you have multiple accounts. For example, if you have three accounts earning 1.4c each, you will be paid 3c in total. But if you combine them into one account, you will be paid 4c.

However, combining accounts will not necessarily increase the amount of interest you earn. This is because the interest is a multiplier, and compounding is an exponent to that multiplier. So, if all your accounts charge the same percentage, combining them will make no difference to the amount of interest you earn. For example, if you have three accounts that each charge 1%, you will earn 9% (10% growth minus the 1% charge) on all three accounts, and combining them will not change that.

Compound interest

Combining multiple investments into one account will not make a difference to the amount of interest you earn, so long as the interest rate remains the same. However, combining accounts can reduce the number of periodic statements you receive and the number of things you have to keep track of. It can also reduce per-account costs, which can add up to significant savings.

Interest rates

The number of investments you have does not affect the interest rate you will receive. The interest rate is the percentage that dictates how much interest you’ll pay or earn on a financial product. A higher interest rate means you’ll earn more on an initial investment, and a lower interest rate means you’ll earn less interest.

The interest rate is not affected by the number of investments you have, but by the terms of the financial product. For example, if you have three investments that each earn 10% interest, you will earn 9% on all three investments (10% growth minus a 1% charge). Combining these investments will make no difference to the interest rate.

However, the number of investments you have can affect the compounding of interest. Compounding is when the interest earned in one period is added to the principal investment, and then interest is calculated on the new total. The more compounding periods your money experiences, the larger it will grow. Therefore, having multiple investments can potentially increase the compounding of interest and lead to higher returns.

Additionally, having multiple investments can result in per-account costs, such as fixed fees. Combining accounts can reduce these costs and increase your overall savings.

Per-account costs

However, the number of compounding periods is what makes your interest grow. The longer you invest, the more your interest compounds over time, leading to potentially higher returns. If all your accounts charge the same percentage, combining them will make no difference to the interest you earn.

Compounding periods

The number of compounding periods is what makes your interest explode. The more compounding periods your money experiences, the larger it will grow. For example, if you have $200 and invest it in a single account that earns 10% in a year, you will earn $20 in interest. However, if you invest the same amount in two accounts that each earn 10% in a year, you will earn $40 in interest. This is because the interest compounds over time, leading to potentially higher returns. The interest rate is the percentage that dictates how much interest you’ll pay or earn on a financial product. A higher interest rate means you’ll pay more to borrow money or earn more on an initial investment.

Combining accounts can also reduce the number of periodic statements you receive and the number of things you need to keep track of. It can also reduce per-account costs. For example, if you have three accounts earning 1.4c each, you will pay 3c in total. However, if you combine them into one account, you will pay 4c. This is because the individual payments are no longer lost as rounding errors.

It's important to note that combining accounts will not always increase your interest earnings. If all your accounts charge the same interest rate, then combining them will make no difference to your earnings. For example, if you have three accounts that each charge 1%, then you are earning 9% on all three accounts. Combining them will still result in a total of 9% earned.

In summary, the number of compounding periods can significantly impact your interest earnings. Combining accounts can sometimes increase your earnings, but it depends on the specific interest rates and fees charged by each account.

Frequently asked questions