The Power of Compounding - Deepstash

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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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MORE IDEAS FROM THE SAME ARTICLE

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

  • 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...

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

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