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:
- Never lose money – if you lose capital, it’s gone forever, no longer able to work for you and earn more
- 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!