## The Power of Compounding – Study Done by Market Logic

In order to emphasize the importance of time in the power of compounding, I am including this extraordinary study done by Market Logic, of Ft. Lauderdale, FL 33306.

In this study we assume that investor B opens an IRA at age 19. For seven consecutive periods, he puts \$2,000 in his IRA at an average growth rate of 10% (7% interest plus growth). After seven years, this fellow makes NO MORE contributions—he’s finished.

A second investor, A, makes no contributions until age 26 (this is the age when investor B was finished with his contributions). Then A continues faithfully to contribute \$2,000 every year till he turns 65 (at the same theoretical 10% rate).

Now study these incredible results: B, who started investing at an earlier age and who made only seven contributions, ends up with MORE money than A, who made 40 contributions but at a LATER TIME. The difference in the two is that B had seven additional years of compounding than A; those seven early years were worth more than all of A’s 33 supplementary contributions.

I exhort you to introduce this study to your kids. It reiterates the fact that the earlier you start, the richer you will be.

 INVESTOR A INVESTOR B Age Contribution Year-End Value Contribution Year-End Value 8 0 0 0 0 9 0 0 0 0 10 0 0 0 0 11 0 0 0 0 12 0 0 0 0 13 0 0 0 0 14 0 0 0 0 15 0 0 0 0 16 0 0 0 0 17 0 0 0 0 18 0 0 0 0 19 0 0 2,000 2,200 20 0 0 2,000 4,620 21 0 0 2,000 7,282 22 0 0 2,000 10,210 23 0 0 2,000 13,431 24 0 0 2,000 16,974 25 0 0 2,000 20,872 26 2,000 2,200 0 22,959 27 2,000 4,620 0 25,255 28 2,000 7,282 0 27,780 29 2,000 10,210 0 30,558 30 2,000 13,431 0 33,614 31 2,000 16,974 0 36,976 32 2,000 20,872 0 40,673 33 2,000 25,139 0 44,741 34 2,000 29,875 0 49,215 35 2,000 35,062 0 54,136 36 2,000 40,769 0 59,550 37 2,000 47,045 0 65,505 38 2,000 53,950 0 72,055 39 2,000 61,545 0 79,261 40 2,000 69,899 0 87,187 41 2,000 79,089 0 95,905 42 2,000 89,198 0 105,496 43 2,000 100,318 0 116,045 44 2,000 112,550 0 127,650 45 2,000 126,005 0 140,415 46 2,000 140,805 0 154,456 47 2,000 157,086 0 169,902 48 2,000 174,995 0 186,892 49 2,000 194,694 0 205,581 50 2,000 216,364 0 226,140 51 2,000 240,200 0 248,754 52 2,000 266,420 0 273,629 53 2,000 295,262 0 300,992 54 2,000 326,988 0 331,091 55 2,000 361,887 0 364,200 56 2,000 400,276 0 400,620 57 2,000 442,503 0 440,682 58 2,000 488,953 0 484,750 59 2,000 540,049 0 533,225 60 2,000 596,254 0 586,548 61 2,000 658,079 0 645,203 62 2,000 726,087 0 709,723 63 2,000 800,896 0 780,695 64 2,000 883,185 0 858,765 65 2,000 973,704 0 944,641 Less Total Invested: 80,000 14,000 Equal Net Earnings: 893,704 930,641 Money Grew: 11-fold 66-fold

Remember that as time passes, the power of compounding accelerates dramatically. If you’re a young person, all you need to know is that you must start early to stay ahead in the game of compounding and wealth creation. The best time to plant a seed was twenty years ago; now is your second opportunity to do the same. Do not waste a day!