Compound return comparison

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Check it out at this link! Originally created for the post: ‘Incredible power of compound returns’

What it is

This is a simple set of calculations showing the effect of compound returns over time (30 and 90 years) across a range of annualized returns from 1% to 20%.

Why I created it

It’s hard to understand how impactful compound returns can be. Doubling your return from 6% to 12% will result in a ~6X increase in total value over 30 years. Over 90 years, that difference grows to ~140X. Incredible. This emphasizes the importance of two things:

  1. Never lose money – if you lose capital, it’s gone forever, no longer able to work for you and earn more
  2. Every percent of return matters – our simple monkey brains tend to think that a few percent here or there isn’t much… but over time it adds up to A LOT! This is why minimizing fees is so important. It’s also why holding bonds is such a bad idea.

How you can use it

Review this every once in a while to remind yourself of the importance of generating durable, inflation protected returns over time. Every time I look at this sheet, it always blows my mind!

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