Is a 1.5% interest per month on a relatively small amount worth it?

Is a 1.5% interest per month on a relatively small amount worth it?

On Quora, a user posted a great question on whether 1.5% interest per month on a small invested based was worth the effort.  Well, it depends.

To provide a more concrete, visual example, let’s assume the following variables on what we might consider a “small” amount:

Assumptions

  • Assume $1000 initial investment/deposit with no additional deposits thereafter
  • 1.5% monthly interest = 18% by end of year
  • Assume one year time¬†horizon

Here is what one might expect

As can be shown above highlighted in yellow, you could achieve $195.62 in interest with an initial investment of $1000. Not bad at all.

However, finding an investment willing to yield an annual 17% return would be difficult to find unless you’re invested in higher risk investment vehicles (e.g. hedge funds).

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