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The power of compounding ~ Get Rich Slowly

https://www.getrichslowly.org/power-of-compounding/

getrichslowly.org

The power of compounding ~ Get Rich Slowly
Does compounding matter to your investment returns? HELL YES! Your contributions matter most but it's the power of compounding that leads to a wealth snowball. Want proof? Just look at these numbers...

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Financial Success: Start Early

Financial Success: Start Early

Financial success is dependent on good habits practised over a long period of time.

You can still have a positive impact on your financial future if you're starting later in life, but you will then have a lot of work to do. This is due to the magic of compounding, that can help you create an impressive wealth snowball.

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The Power of Compounding

At first glance, compounding does not look remarkable. However, looking at compounding in action, you will notice a few things.

Consider, for example, investing in stocks at an average real return of 6.8%. (It is inflation-adjusted.) During the first few years, compounding doesn't really do much. After ten years, your initial investment would nearly double. After 16 years, your initial investment would triple, and in 20 years, it will quadruple. By year 40, you're earning more than your initial investment every year.

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The Importance Of Saving

Your investment returns are less important than your investment contributions. That is to say, how much you invest matters more than where you invest.

The more you contribute, the more there is to compound.

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Make Compounding Work For You

  • Start early. The sooner you start, the more time compounding can work in your favour and the wealthier you can become. Next to starting early is starting now.
  • Stay disciplined. Make regular contributions to your savings and retirement accounts. Try to increase your deposits with time. Your goal is to generate a large saving rate.
  • Be patient. Don't touch your investments. Compounding only works if you let your money grow.

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  4. If one of your friends recommends an investment that's making them a lot of money, they are probably suckers too. If you see the "results not typical" on any marketing materials, move on.
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Smart retirement planning boils down to a few simple truths.

  • Time is on your side.  The earlier you start saving money, the more time you give compounding to work for you. 
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