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Investment 1: This is also a one-off cost paid at the start of the period over 7 years, costing $4,000. It earns interest twenty-four/seven all the time because such concepts are more automatically managed than with other types of investment.
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Investment 2: It involves making less frequent, smaller regular investments of $2,000 in the first year, $1,500 in the second and third years, and $500 in the fourth. These smaller amounts have a timeframe within which they start earning interest.
Result: Investment 1 increases to approximately $5,135.69, out of which $1,135.69 earns interest. Investment 2 appreciates to $4,918.93, creating almost $918.93 in interest.
Conclusion:
Given more money over a longer period, Investment 1 earns more interest than Investment 2.
Reasoning:
This is preferable to installment investing because the money being invested earns interest for a longer time than an installment investment. It does not do this at the scale or as progressively as the smaller and more spread-out investments do. That is why it is more advisable to send larger incremental contributions than weekly or monthly contributions, if possible.