The Eighth Wonder of the World
"Compounding isn’t just about investing though, it’s about your life, it’s about relationships, it’s about your career."
I tell people all the time how simple investing is. There really aren't that many complicated concepts. Perhaps the most complicated (and important) concept is compounding. Albert Einstein called compounding the 'eighth wonder of the world'. And that tells you a lot.
The problem is that most people have no idea just how powerful it is.
When you invest your money you generate interest upon interest and this effectively snowballs. Let's take some figures. Let's say that at 22 years old you get your first job. You live at home for a few years or rent somewhere and manage to save $600 every month. You invest that money in a well diversified pot of global companies and it grows by 9% per year. In five years, at age 27 you have $45,254 in your investment account. At that point life starts to get more expensive....you have kids, decide to buy a house and your savings start to go elsewhere and not into your investment account. You don't add another cent to your account, but you leave it untouched for the next 40 years until you retire at 67 years old. Your account then would be worth $1,421,417. Yes, that's $1.4 MILLION. $1.4 million from $600 invested every month for five years. It's almost too hard to believe.
That's how powerful compounding is.
I love this article that talks about the power of compounding in our lives. The author writes that the three most important areas to apply compounding to are:
Imagine if we got just 1% better every day in each of those areas of our lives and let compounding do its work.
I'd love to help you start compounding your money. All you have to do is drop me a line.
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