Let’s take the example of $2,000 invested in an index fund when you are 20 years old, which is then left on its own in a fund that compounds once per year. You do not contribute anything else but that original $2,000. Let’s take a look. 1st year—age 21: As I said, at 8 percent interest, you wind up with $2,160. 2nd year—age 22: Your $2,160 earns interest and becomes $2,332. 5th year—age 25: In five years you have $2,938.66; you made $938.66 for doing nothing but leaving $2,000 to sit for five years. That is almost half of your principal. But wait, it gets better! 10th year—age 30: In 10 years
...more
