Understand the mathematical "eighth wonder of the world" and how time transforms small contributions into significant wealth.
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Compound interest is the process where the value of an investment increases because the earnings on an investment, both capital gains and interest, earn interest as time passes. Unlike simple interest, which is calculated only on the principal amount, compounding adds your earnings back into the principal, creating a snowball effect.
The earlier you start, the more cycles your money has to double. Even small amounts saved in your 20s can often outperform large amounts saved in your 40s.
While market volatility is real, consistent long-term returns (like the historical 7-10% of the S&P 500) are the engine of wealth creation.
To estimate how long it takes for your money to double, divide 72 by your annual rate of return. For example, at a 6% return, your money doubles every 12 years (72 รท 6 = 12).
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