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Many people will be familiar with the concept of compounding either from the running of previous racing services/systems or simply by using savings accounts from high street banks. It is a powerful tool that can be applied in many areas when it comes to accumulating wealth.

 

For those who are new to compounding, by definition it is the process of accumulating the time value of money forward in time.

 

It is a method of growing money more quickly than time would usually allow.

 

 

We make this happen by adding investment earnings to the principal investment, forming a larger base on which future earnings may accumulate. As the investment base gets larger, it has the potential to grow faster, and will grow in an exponential fashion.

 

This means that the longer your money is invested, the more you stand to gain from compounding.

 

 

Lets use an example to demonstrate further:

 

£20,000 gets invested in a savings account at 8% interest per year (not likely these days, but let's assume it's possible for the example).

 

The investor decides to withdraw the interest each year to supplement their income and so comes out with £1600 per year. Over a 10 year period this amounts to £16,000 interest earned.

 

However, if that investor instead chose to use yearly compounding, over a ten year period their total accrued interest would stand at £23,178.50. That is a whopping £7,178.50 more than if the interest was withdrawn year by year.

 

Furthermore, this is only the tip of the iceberg as money accumulated this way grows exponentially. Over a 25 year period the total interest earned would be a massive £116,969.50, which is almost 3 times the total amount earned by collecting the interest each year, £40,000.

 

 

It is therefore extremely useful to compound our investment profits. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

                                 

             

 

Compounding graph showing monetary growth at different rates of interest

 

 

 

Compounding can be used to greater effect in horse racing investments, as bets are placed on a day to day basis and we can therefore compound our betting bank daily. In fact, the recommended staking plans included with our betting service use compounding in one form or another.  

 

 

Not only does this allow profits to be gained more quickly when our services are perfroming well, but  during the occasional losing run our betting bank is protected, as we are reducing our bet size each time we have a loss.

 

 

compounding-different-rates

Compounding

Copyright © 2017. All rights reserved / Lucrative Racing Trust / Site Map /  Privacy Policy / Terms & Conditions