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Power of Compounding

Posted on Jun 8, 2020 in Personal Finance

Power-of-Compounding

Compound Interest

Compound Interest has three main factors. Money you can invest per month, return percentage and number of months you can stay invested(Time).

For most of us, We don’t have control over how much we can afford to invest per month and how much returns our index fund will give per month.
Only option we have is how soon we can start investing and how long we can stay invested.

Below table shows how easy is to reach retirement nest egg of $1.7 Million by investing $500 per month on index funds starting at the age of 25.
Same become dificult if we start very late.

Starting AgeRetire AgeMonthly ContributionReturn %Maturity Amount
2565$5008%$1.73 Million
3565$10008%$1.48 Million
4565$20008%$1.178 Millon
5565$60008%$1.1 Million