It’s more than just an investing concept.
It’s the idea that exponential growth is possible in many of the most important areas of life.
Love and relationships, health and fitness, knowledge and wisdom, mindfulness and spirituality – all have elements that can benefit from the power of compounding.
In investing, the formula for compounding looks like this:
A = P * (1 + r/n)^nt
A = ending amount, P = starting principal, r = rate of interest/growth, n = number of times compounded over t units, and t = time
In life, the formula looks more like this:
Future you = Today’s you * (Rate of Improvement)^(Time)
Both formulas can be reduced to this: small positive habits, exercised with discipline, can lead to extraordinary results over time.
At first, the benefits of compounding may seem deceptively small, like the famous example of the doubling of a single grain of rice on a chessboard. But before you know it, there’s more rice on the chessboard than ever existed in the world.
If you invest $100 at the time of your child’s birth, it would grow to $259 by their 10th birthday and $740 by the time they turn 21 (assuming a 10% rate of return, the long-term average for the US stock market).
But what if I told you that same $100 would grow to over $1.37 million by their 100th birthday?
That is the power of compounding.
Walt Disney once said the “way to get started is to quit talking and begin doing.”
At Compound Capital Advisors, we’ve made it our mission to help guide investors on the road to a wealthy and meaningful life.
Disclaimer: All information provided is for educational purposes only and does not constitute investment, legal or tax advice, or an offer to buy or sell any security. For our full disclosures, click here.