“The most powerful force in the universe”

Albert Einstein, who knows a lot about powerful forces, is credited with recognizing that "The most powerful force in the Universe is compound interest."

Take a look at the effect of compounding over time on an investment of $1,000:


Annual Rate of ReturnNumber of years
5 10 20 30 40
2%1,1041,2191,4861,811 2,208
4%1,2161,4802,1913,243 4,801
6%1,3381,7913,2075,743 10,285
8%1,4692,1594,66110,063 21,725
10%1,6112,5946,72717,449 45,259
12.5%1,8023,24710,54534,243 111,199
15%2,0114,04616,36766,212 267,864
17.52,2405,01625,163126,222 633,162
202,4886,16238,338237,376 1,469,772
23.5*2,8738,25468,130562,353 4,641,713

*Warren Buffett has a 23.5% compound annual return over 40 years.

  • If you delay retirement investing for 10 years (start your retirement investing at 35 instead of 25), you reduce your investment return by 61.5% (based on a 10% annual return until age 65).
  • If you reduce your return by 2% because of trading or mutual fund loads (getting 8% instead of 10%), over 30 years you reduce your return by 44.9%.

If you would like to see the impact of compounding on your investment portfolio, contact Visible Investment Advisors for a free consultation.

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