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Never underestimate the sheer power of compounding…
The chart below shows the paths of three stock investors: Chris, Bill, and Susan. Each of them invests $5,000 per year in the exact same hypothetical investments that yield the exact same rates of return. The only difference among the three investors is time.
As you can see, Chris “wins” the investment race. He begins investing at 25 years old. He keeps investing until the age of 65. His total investment of $200,000 has grown to over $1.1 million. No surprises here.
But take a look at the shocking disparity between the investment returns of Susan and Bill…
Susan invests $5,000 per year for only 10 years. She starts at age 25. Bill also invests $5,000 per year, but for 30 years. He begins at age 35. Bill invests $100,000 more money than Susan does… but Susan’s investment beats Bill’s by over $61,000. That is the staggering power of compounding over time.
The Incredible Power of Compounding at Work
Once you grasp the immense power of compounding over time, all you need to do is choose the optimal investment vehicle(s). Regular Daily readers already know the answer to this: Legacy stocks. Legacy stocks are the largest, safest, most powerful companies in human history. They erupt cash and dominate their industries. This allows them to reward their shareholders with consistent dividend increases and share buybacks… which magnify the wealth-creating effects of compounding over time.
Following our recommendations in these companies is important… but learning how to spot and invest in these wealth-creation machines for yourself is even more powerful. More on that in our next item…