(This is one reason index funds outshine managed mutual funds.
Index funds, as a whole, earn that 6.8% average annual return that the overall stock market earns.
real return: 6.8% for stocks, 2.4% for bonds, and 1.2% for gold.
When it comes to dating, relationships, or even just building trust with co-workers, your actions (physical and chemical) always speak louder than words.
(If you want to know more right now, check out my articles on stock market returns and how to invest.) Today I want to look at why some folks consider compounding to be the most powerful force in the universe.
On its surface, compounding is innocuous — even boring. Will it really affect what you can spend in the future?
That’s 193.5% growth in just over eight years (or 12.31% annually).
Here’s a second example, this time with the moved money from my box factory retirement plan to a rollover IRA: Here, I’ve contributed a total of ,027.41 to the account — most of it in 2009, but a few thousand just last month.
Here, for instance, is an XKCD comic belittling the power of compounding: How true is that? In this case, assume you invest 00 on January 1st for the next fifty years. Here’s the table: Yes, the amount of you save is more important than the returns you earn. (In other words, if I were earning no return because I stuffed my money under a figurative or literal mattress.) I’ve contributed a total of ,518 to this 401(k) since the end of 2008.