Look at @TermMax such fixed-income products—the easiest pitfall is to treat the APR shown on the page as a compound annual return. After a year, you feel like you can “roll out” a huge amount. In fact, TermMax’s FT uses a discounted pricing model like a zero-coupon bond—buy at a discount, and at maturity it’s redeemed at par value. The return in between is calculated on a simple-interest basis, not interest that compounds upon interest (“interest-on-interest”). The APR on the page is the annualized result of converting that discounted value; it only reflects the one-time gain if held to maturity and does not include reinvestment/compounding.
The difference between simple interest and compound interest grows as the holding period gets longer. For shorter terms, with settlement once at the end, the gap isn’t very noticeable; but once you plan to hold long-term for a year, assuming each month’s earnings can be rolled into new earnings again, you end up overestimating. FT’s return is locked in at the moment you buy—based on the discounted value. It won’t “grow by itself” unless you sell and reinvest; it doesn’t automatically compound.
So true compounding in TermMax doesn’t happen automatically. It’s the result of your manual reinvestment: after maturity, you take the cash you receive—interest plus principal—and put it into the next term market. Whether you renew and at what rate you renew determines whether your final outcome is simple interest or a gradual compounding effect. The page APR only annualizes the discounted price for a single term; it doesn’t determine your real cross-term returns.
Therefore, when I judge whether a market is worth it, I don’t just look at the annualized number on the page. I verify three things at the same time: whether that APR is based on simple interest or compound interest, what discount you get if you exit early, and whether there’s a same-asset market worth renewing into after maturity. If you only treat the page APR as if it were compounding when forming long-term expectations, the calculated returns are often far more optimistic than what you actually receive. The APR shown on the page is just the annualized discounted figure for one term. What truly determines how much you end up with is the interest calculation basis and how you reinvest/renew at maturity—those two numbers are the “face value” and the “substance.” Don’t take the face value as the substance.
#termMax $BTC
The difference between simple interest and compound interest grows as the holding period gets longer. For shorter terms, with settlement once at the end, the gap isn’t very noticeable; but once you plan to hold long-term for a year, assuming each month’s earnings can be rolled into new earnings again, you end up overestimating. FT’s return is locked in at the moment you buy—based on the discounted value. It won’t “grow by itself” unless you sell and reinvest; it doesn’t automatically compound.
So true compounding in TermMax doesn’t happen automatically. It’s the result of your manual reinvestment: after maturity, you take the cash you receive—interest plus principal—and put it into the next term market. Whether you renew and at what rate you renew determines whether your final outcome is simple interest or a gradual compounding effect. The page APR only annualizes the discounted price for a single term; it doesn’t determine your real cross-term returns.
Therefore, when I judge whether a market is worth it, I don’t just look at the annualized number on the page. I verify three things at the same time: whether that APR is based on simple interest or compound interest, what discount you get if you exit early, and whether there’s a same-asset market worth renewing into after maturity. If you only treat the page APR as if it were compounding when forming long-term expectations, the calculated returns are often far more optimistic than what you actually receive. The APR shown on the page is just the annualized discounted figure for one term. What truly determines how much you end up with is the interest calculation basis and how you reinvest/renew at maturity—those two numbers are the “face value” and the “substance.” Don’t take the face value as the substance.
#termMax $BTC