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Ask Philip: What Is Compound Interest?

Guess who’s back, back again? Philip Michael scrolled through his DMs to find your questions, and he’s got answers. In this segment, you asked about investments in Canada compared to the U.S. You also asked about compound interest and starting a business with nearly zero dollars. For the full responses, check out the video!

Q. I would love to start my investment. I live in Canada but am unsure if that’s a good market or if it’s best to get into the American market.

A. Whenever we have a pivotal decision, we always start thinking about all the things that can go wrong and what can happen there. As with anything else in life, you just simply need to get started. Yes, you can invest in Canada; the key thing is just starting with what you have and where you are.

I’m not too familiar with the good companies up there, so I’m just going to speak from an American perspective. We have something here called index funds: S&P 500 ETFs. ETFs are publicly traded companies that invest in the top companies on the stock market. So, they mirror what the stock market does as a whole. Therefore, they follow an index – hence index funds. Over the past 140 years, the stock market has gone up by 9 to 10% every year. If you put in $500 every month in an index fund, you have a really strong foundation before you know it. Then you have a set foundation to go out and try risky stuff.

Q. I’m very interested in learning more about compound interest as well as real estate and land flipping. Do you do a class or something?

A. I do events every single week on You can follow the link and find them. I also do stuff every day on Instagram.

Have you ever seen the graphic where a penny doubled every day grows over a period of 30 days? At first, it compounds very slowly. By the time you get to the 26th day, that’s when the money starts getting big. That’s the logic behind compound interest.

Now think about this for a second. Let’s say you have $100 and a 15% return. It doesn’t seem like much, but if you really do the math, five years of 15% returns – that equals doubling your money. It’s just math.

In real estate, it’s very common actually that people double their money in these private deals. In terms of flipping, you don’t really have the effect of compound interest because you’re in and out quickly, so you don’t have time to allow it to compound. It’s just all about being financially literate.

Q. I really want to start a business, but I just did the numbers and realized how much it will cost. I only have about $5,000 saved. Can I still do it?

A. If you watch “Shark Tank,” one of the things they tell you is you must know your numbers. Secondly, what kind of business you’re trying to start? You don’t need $5,000 to start a business unless you’re trying to start something that’s very cost-prohibitive. You can start a lot of businesses without actually spending a single dollar. In fact, I’m a big advocate of doing just that. Go out there and stress test the hypothesis of whether somebody would pay you for the service that you’re trying to render.

There’s a lot of business you can test that’s just on Craigslist and Facebook. A lot of them that you can start without actually having to do the work. If people are buying, you are printing on demand. You don’t actually have to store an inventory, hire a bunch of designers and get a warehouse or factory to produce your stuff. You just put out the design. If they buy it, boom, you’re in business.

So, think about a business you can start that doesn’t cause a lot of money, or find a way to save enough money to start a business. Hopefully, that is helpful.

If you want to hear your question answered live, make sure to follow us on social media. Ask us a question on Facebook, Twitter or Instagram @Bold TV, and you may be featured in our Bold Business show.

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