The Power Of Compounding

Who’s the winner?

The sister contributed only $14,000 (2,000 per year over seven years) and ended up with $944,641. That’s a net gain of $930,641, or 66 times her original investment.

The brother contributed $80,000 ($2,000 per year over 40 years) and ended up with $973,074. That’s a net gain of $893,704, or 11 times his original investment.

The sister was able to accomplish much better results with much less money… all because she realized the power of compounding money over long periods of time.

If you missed this, go back and read the example again until you realize what happened.

Not only is compounding an incredible wealth builder, but it’s also simple to do. First, you need an investment that generates a return every year for many years in a row. Then, you need time and perseverance to let the dividends grow.

Compounding doesn’t require vigilance, activity, or effort to make it work. In fact, it works best when you forget about it altogether.

Action to Take –> This is why compounding is by far the best investment strategy for your children or grandchildren. They have time to let the dividends accumulate, and they won’t think about their accounts every day.

This article was originally written by Tom Dyson and posted on StreetAuthority.

Warren Buffett’s Top 5 Stocks

Buffett’s firm, Berkshire Hathaway, holds dozens of stocks. But these five make up 75% of its portfolio… worth $65 billion. Click here to get Buffett’s top 5 stocks plus his 16 latest buys, FREE.