Friday, December 19, 2014

compound interest

Tony Robbins, in an interview with Warren Buffett, asked his secret to wealth. Buffett replied, “No. 1, it’s being born in America. No. 2 is good genes, so I live long enough. And No. 3, it’s compound interest. Compound interest — people have no idea the power that it really has.”

The best time to invest may have been in the past, but the second-best time to invest is today! Everyone, regardless of income, can take advantage of the power of compound interest. Einstein called it the “Eighth Wonder of the World.” Compound interest is the interest you earn on the initial amount you invested and the interest you already earned. It is basically “interest on interest.” The growth becomes exponential the more time you have.

Of Buffett’s $63 billion net worth, approximately $60 billion came after his 50th birthday, and $57 billion after his 60th. While you can always work to get more money, invest wisely to get a higher return — you can never get more time. Since the power of compound interest comes from time, you need to get started as soon as possible.

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