Power of Compounding

The Power of Compounding is one of the most important investing lessons


Richard Russell

Mentioned by the Following


Rich Man, Poor Man

Compounding is a wonderful road to riches
  • It is safe
  • It is secure
  • It is easy

However, compounding requires patience and time
  • It is boring
  • It requires patience (it only works through time)
  • It requires sacrifice (you can't spend what you've saved)
  • Time is one of an investors best allies

Real World Example Of The Power of Compounding
A person who invests less money but earlier can end up with much more money than a person who invests more money but later in life.
  • Person A
    • Invests 1,000 per year from age 19 to 25
    • Earns 10% per year
  • Person B
  • At age 65, person A ends up many times more money than does person B