Power of Compounding Interest

Based on a 10% return yearly with a starting capital of $100,000.

From the pictures above, you can clearly see that it is a different scenario from my inflation post. This is the power of investing. When you invest, you can reinvest and compound your money.

First of all, what is “compound interest” ?

From the definition of dictionary.com:

Interest paid on both the principal and on accrued interest.

In Simple Terms:
After you’ve earned your 10% interest at the end of each year, you decide to reinvest your earnings. This is what can happen if you do so every year.
It does not mean that you need a huge capital! We all have to start from somewhere.
You can see from the picture below that the starting capital is only $3000. But if you slowly add in more as time goes by, this is what you can expect.
You can calculate your own amount with the help of this compound interest calculator from moneychip.
This is why we should all learn to be an investor instead of a saver.
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