The Compound Effect

This morning I stumbled upon an older post at NoMoreWaffles. This reminded me once again about the great powers of the Compound Effect. An even more impressive image in my opinion is the one below created by JPM:


When I showed this to two friends of mine they were distracted by the details. One argued that using a 6.5% return was a bit excessive. The other friend responded dissapointed he allready missed the 25-30 year old period.

What impresses me most in this graph is not so much the exact figures but the extreme effect of starting early. Quincy is the most speaking example according to me as this fictive person only invests for a 10 year period at $10K per year and ends up with $950K. She invests only a third of the amount that Noah and Lyla do and ends up with more.

Whichever option is closest to your personal situation, the effects of time in combination with a 6% return are amazing. You can remember this when one of your holdings has a 3% dividend yield and raised the dividend a dissapointing 3%, that’s not all that bad 🙂

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Rich Neighbour

This Rich Neighbour: Works smart, Invests regulary, Lives frugally, Makes a financial planning & Enjoys passive income.