Friday, April 25, 2008

Thinking about Investing? Start Now

The below chart illustrates the importance of investing early and the power of compounding interest. When it comes to investing time really is on your side.

Case 1:
• $2,000 invested annually in years 1 to 5
• No contributions after year 5
• Assumed rate of return of 10%
• Interest compounded annually.
• All interest is reinvested.
• Total invested $10,000

Case 2:
• No money invested in years 1 to 10
• $2,000 invested annually in years 11 to 40
• Assumed rate of return of 10%
• Interest compounded annually.
• All interest is reinvested.
• Total invested $60,000



You have probably seen similar charts on the front of mutual advertisements and although I’m not a huge proponent of mutual funds I think the underlying message is valid---The earlier you start investing the better.

15 comments:

MG said...

years ago I came upon the chart with this concept in 'Smart Couples Finish Rich'; it was a real eye opener for me.

Ryan C. said...

looks remarkably similar to this post dated 3 days earlier

http://americandividendinvestor.blogspot.com/2008/04/thinking-about-investing-start-now.html

Middle Class Millionaire said...

ryan,

I also administer that site. It was going to be an American version of this site (just haven't really had enough time for original content on both...)

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