The Power of Compounding
How can investing make you rich? It's the miracle of compound interest. Even modest returns can generate real wealth given enough time and dedication.This article will show you what is compounding and its impact on your investment.
The table below shows you how a single investment of $100 will grow at various rates of return. Five percent is about what you might get from CD (certificate of deposit) or a government bond. You'll get an average of 10% from mutual fund. this number is derived from historical average stock market return. If you carefully learn how to pick your own stocks you might get 15% or more.
Growing At
| Year |
5% |
10% |
15% |
20% |
|---|---|---|---|---|
1 |
$100 |
$100 |
$100 |
$100 |
5 |
$128 |
$161 |
$201 |
$249 |
10 |
$163 |
$259 |
$405 |
$619 |
15 |
$208 |
$418 |
$814 |
$1,541 |
25 |
$339 |
$1,083 |
$3,292 |
$9,540 |
From table above, you are witnessing the miracle of compounding interest. When your investment begin to earn money (gains/returns), and then those returns start to earn money, your investment can mushroom very quickly. Extend the time period or raise the rate of return, and your results increase exponentially.
The power of compounding is the most important reason for you to start investing. Let your money working for you, helping to ensure a financially secure and stable future. Compounding creates a snowball of money. At first your returns may seem small, but if you’re patient, they’ll become enormous.
Try our simple compounding calculator below. Enter your money, interest rate and how long would you wait for your money to grow. Watch the power of compounding. Note: this calculator needs Adobe Flash Player. If you don't see any text or image below, then you need to download Adobe Flash Player for free here.
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