Compound Interest Will Create More Millionaires by 2030 Than Any Other Strategy
Compound interest is when your money grows over time as investments gain value. Each time your portfolio goes up 1%, it’s not just the principal that gains value. All of your unrealized gains also go up by an extra 1%.
For instance, a 10% return on $100 turns it into $110, which is an extra $10. Then, if you get the same 10% return the following year, your $110 balance turns into $121. Not only did the $100 principal increase, but the $10 earned in the previous year also increased by 10%.
This process mints many millionaires because they don’t stop with a $100 investment. Some people put thousands of dollars into their portfolios each month, and that’s when compounding starts to crush all of the other strategies for building wealth.
Source: www.fool.com — article syndicated from the publisher’s feed; all rights remain with the original publisher.