Lesson 1.3

Power of Compounding

"Compound interest is the eighth wonder of the world. He who understands it, earns it ... he who doesn't ... pays it. Compound interest is the most powerful force in the universe." - Albert Einstein

  • Example:
    • According to the Rule of 72, stocks double every 8 years (72/9 = 8 years). If you live 64 more years, then how many doubles will you get from stocks?
      • 64/8 = 8 doubles
    • Assume you start with $5,000 and allow it to double 8 times over 64 years. How much will it the $5,000 grow into?
      • First Double: $10,000
      • Second Double: $20,000
      • Third Double: $40,000
      • Fourth Double: $80,000
      • Fifth Double: $160,000
      • Sixth Double: $320,000
      • Seventh Double: $640,000
      • Eighth Double: $1,280,000 [MILLIONAIRE]

1 | 1.1 | 1.2 | 1.3 | 2 | 2.1 | 2.2 | 2.3 | 2.4 | 3 | 3.1 | 3.2 | 4 | 4.1 | 4.2 | 4.3 | 4.4 | 4.5 | 4.6 | 5 | 5.1 | 5.2


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