Everyone’s heard about the concept of compounding in the investing world, though does is actually work?
simple terms
In simple the topic of compounding has been around for a very long time and shows how regular investment over time and leaving the accrued interest accumulated invested over time can magnify investment returns. The word of time has been highlighted as there is no secret or miracle or power to compounding, the bottom axis is always time.
investment compounding example
Let’s take the above concept and calculate with a simple example of how investing $1000/month regularly over 10 years would look like with a compound interest rate annually of 7%.
Doesn’t seem like a lot after 10 years - approximately $165,000 of investment value. Let’s try 20 years of time.
Ok just made a shy of $500,000 after 20 years of time. Still seems like a long time to wait for 20 years. Let’s try 30 years of time.
Woohoo we made the $1,000,000 club after 30 years now. If you haven’t noticed since the 20 year mark the point of accrued interest (light blue) over time is growing faster and the regular deposit of $1000/month.
Now you may say that I don’t have 30 years left, maybe a change in MinDset is required. Could you change the regular deposit to $2000/month to reduce the time or can you educate yourself to other strategies to attain the goal or target within a desired time.
Do you have patience to become a decades investor, consistently and steadily building wealth over time and constantly practising delayed gratification to attain the financial success, fulfillment and happiness.
A simple summary to the MinDvesting philosophy from todays post:
→ taking the step is upon you.
→ constantly educating yourself.
→ practising patience and delayed gratification within the MinD.
→ the bottom axis to attaining a goal is always time and this again is depending on you.
Remember the limiting factor in all of the above is only the MinD.
Appreciate your time and making it this far in the post, keep reading over time.
“The pain of discipline is uncomfortable, but the pain of regret is unbearable” - SB Keshav Swami