The Magic of Compound Interest

“Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.” Albert Einstein.

When you invest early, you don't take out your investments, and you allow it to grow the effect, can be incredible. In fact investing $100,000 at only %2 for 40 years will grow that into $220,804. Now realize gains of 4% instead of 2% and that total becomes $480,102. So when we get to 8% (which is well below the past 40 year S&P 500 return of 9.4% [per Investopedia.com "S&P 500 Average Return" Feb 15 2023], ending Dec 31 2022, past performance is no guarantee of future results) that $100,000 turns into $2,172,452. So here is where we get interesting, How about if your investments just beat out the S&P 500, say by only 0.6%? That $100,000 would become an incredible $4,525,926! Finally just for fun I want to show you what would happen if you could get a 12% return for 40 years, that would be $9,305,097. It doesn't take a genius to realize how great compound interest can be. But it certainly helps to have a guy like Mr. Einstein reinforce this simple fact.

For more information on compound interest, please visit https://en.wikipedia.org/wiki/Compound_interest (VPIA™ is not affiliated with Wikipedia and does not guarantee, approve, or endorse the information or products available on that site.)


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