The most powerful
force in the universe is compound
interest. —Albert
Einstein
Your stocks and bonds
generate income from capital gains,
dividends, and distributions. When
you keep that income in your account,
by holding long-term or reinvesting
in purchases of additional shares of
stocks or bonds, your earnings generate
additional earnings - and you reap
the rewards of compound returns. Over
many years, the returns you get from
compounding will eventually dwarf your
initial contributions. Review
the table below to see how an initial
contribution of $10,000 can benefit
from the effects of compounding: notice
the rapid increase in growth that comes
after many years of investing.
So does your return
matter? Is a 5% return all that
different from a 15% return? Is
10% really that far away from 25%? The
answer is resoundingly yes; even a
few additional percentage points per
year will dramatically alter your portfolio.
The table below
shows how a hypothetical investment of
$10,000 would grow with different annual
returns. Liberty Hill does not
guarantee any particular annual return
(indeed, beware of anyone who does),
but you can get a sense of our performance here.
Annual
% |
Start |
Year
5 |
Year
10 |
Year
20 |
Year
30 |
5% |
$10,000 |
$12,763 |
$16,289 |
$26,533 |
$43,219 |
10% |
$10,000 |
$16,105 |
$25,937 |
$67,275 |
$174,494 |
15% |
$10,000 |
$20,114 |
$40,456 |
$163,665 |
$662,118 |
20% |
$10,000 |
$24,883 |
$61,917 |
$383,376 |
$2,373,763 |
25% |
$10,000 |
$30,518 |
$93,132 |
$867,362 |
$8,077,936 |
30% |
$10,000 |
$37,129 |
$137,858 |
$1,900,496 |
$26,199,956 |
|
