I came across a great article written by Pete Wargent a couple of weeks ago which reminded us about the 8th Wonder of the World – Compounding Returns!
Some things about compounding don’t appear to make any logical sense on face value. When the value of an investment doubles at regular intervals, the increase in the value of the portfolio at each interval totals more than all previous gains!
As you can see from the example below, a portfolio which doubles in value every 7 years by earning an annual return of 10.29% will increase in value by $3.1m in the first 35 years and then $3.2m in the last 7 years!
Seeing how these gains can accelerate when left to grow unimpeded by capital gains tax and transaction costs should draw investors to 2 conclusions:
This is just another reason to set up an automatic investment strategy.
The team at Green Taylor Partners can point you in the right direction to get you started.