Skip to main content

Market Overview

Is Compounding Interest 'The Most Powerful Force In The Universe?'

Share:
Is Compounding Interest 'The Most Powerful Force In The Universe?'

Tony Isola is an investment advisor representative with Ritholtz Wealth Management and author of an informative financial blog, Tonyisola.com.

On Thursday he discussed why compounded interest is "the most powerful force in the universe" — at least in the financial universe. Properly understanding and making use of compounded interest is what separates the rich from the poor, and those who fully understand how to apply it "may live the life of their dreams."

Isola cited William Poundstone, author of "Head in the Cloud: Why Knowing Things Still Matters When Facts Are So Easy to Look Up," who said that proficiency in understanding compounded interest is not only a predictor of income, but wealth and happiness.

Related Link: Now That You're Making The Big Bucks, Should You Save Or Invest?

"Both debt and investment returns are calculated using the geometric method," Isola added. "If used correctly, this is the path to great wealth. Ignorance of this concept often leads to accumulation of great debt and bankruptcy."

So, just how powerful is compounded interest? As noted by Poundstone, "A worker who starts saving at age twenty-one has a shot at earning more return on his investments than the sum total of his lifetime wages."

Naturally, it is never too late to begin making full use of proper investment methods. People are living well into their 90s these days, so individuals still in the 50s or 60s have plenty of time ahead to take advantage of time in the market, not timing the market.

Do you have ideas for articles/interviews you'd like to see more of on Benzinga? Please email feedback@benzinga.com with your best article ideas. One person will be randomly selected to win a $20 Amazon gift card!

 

Related Articles (SPY + SPX)

View Comments and Join the Discussion!

Posted-In: Compounded Interest Investment Advice Investment Advisors Ritholtz Wealth ManagementEducation Media Personal Finance General Best of Benzinga

Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
SPAC
Everything you need to know about the latest SPAC news.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com