I recently had a conversation with a friend about investing strategies. He’s smart and well educated, has an amazing career, and is forward thinking. We talked about public market investing, and I brought up the topic of compounding. He said he understood it and quickly moved on in the conversation.
He understood the concept, but I wasn’t convinced he understood the power of compounding. I shared a post containing a simple example that I wrote a few months back. When he looked at the numbers, it clicked. He understood how rate of growth and time work together to produce outsize results.
Albert Einstein famously called compound interest the eighth wonder of the world. It’s one of the most powerful forces that can be applied in many facets of life, not just money. Still, many don’t truly understand the power of compounding and aren’t taking advantage of it. They’re making progress toward their goals—but at a much slower pace than they could be.