The Power of Compound Growth

May 05, 2020
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We have all likely heard of “compound returns” and it’s wonderful, mysterious, abilities. However, during times like these, when stocks are down, it’s difficult to remember just how wonderful it is. While each and everyone’s portfolio will vary, let’s use an example of an average retiree.

Example – About to retire, age 60, life expectancy is 95. Portfolio is expected to earn 7% (these estimates will vary by the person and investment).

It is fair to say that at least some money will need to be preserved for later in life, so a portion of their investments has a 35-year time horizon.

$10,000 growing at 7% per year on average will grow to nearly $100,000 within 35 years, 10 times their original investment. However, patience and time in the market is key here.

After 10 years – Their money has not even doubled, worth $18,384

After 17 years – At the half way point, their money has almost tripled to $29,521

After 35 years – At the end, their money has growth to $99,781, about 10X their original investment. Amazingly more than 70% of the growth has occurred in the 2nd half!

Disclaimer: Alex Voorhees and Reston Wealth Management do not provide legal, accounting or tax advice. This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified investment, tax or legal advisor. The opinions voiced in this article are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) or strategies may be appropriate for you, consult your financial advisor prior to investing. No strategy assures success or protects against loss. You should consider the investment objectives, risks, charges and expenses of any investment carefully before investing.