• ABOUT – DICK YOUNG
  • YWMF – ARCHIVES

Young's World Money Forecast

Since 1978 With a 32 Year Vacation

  • DICK YOUNG
    • FROM RICHARD C. YOUNG
    • THE FINAL INTELLIGENCE REPORT
  • INVESTING STRATEGIES
    • RETIREMENT COMPOUNDERS®
    • DYNAMIC MAXIMIZERS®
    • GOLD & SILVER
  • DIVIDENDS & COMPOUNDING
    • MIRACLE OF COMPOUNDING
    • DIVIDENDS
  • GRAHAM & RUSSELL
    • BEN GRAHAM
    • RICHARD RUSSELL
  • THE DOW AND THE LEADERS
    • DOW vs. S&P 500
    • DOW vs. DOW DIVIDEND PER SHARE
  • WELLINGTON MANAGEMENT COMPANY
  • YOUR SURVIVAL GUY
  • BANK CREDIT & MONEY
  • THE PRUDENT MAN

Miss This Investing Concept to Your Everlasting Sorrow

May 1, 2019 By Richard Young

Lack of patience, more than anything else, hamstrings investors in their pursuit of profits. I wrote in July 2004 that impatiently trading in and out of equities with no eye toward compound interest will bring investors everlasting sorrow.

Compound Interest and You

Here’s a compound interest story that should help you and your spouse. Let’s assume a hypothetical $10,000 investment with a 7% annual return for 20 years. Investor A draws the 7% ($700) each year for living expenses. At the end of 20 years, the original $10,000 in capital remains in place, and $14,000 in simple interest has been drawn for living expenses. The end value in capital and interest drawn is $24,000. Now let’s assume hypothetical Investor B invests the same $10,000 at the same 7%, but draws nothing and simply let’s the money compound for 20 years. Well, $10,000 compounded at 7% for 20 years has an end value of $38,696. You will see that $14,696 ($28,696 – $14,000) represents interest on interest. Over half of the long-term total return for Investor B reflects interest on interest. Unfortunately, compound interest is not a concept that is well understood by most investors.

To their everlasting sorrow, most investors not only lack a basic knowledge of compound interest, but also lack patience and dividend/interest religion. Many are greedy, trade way too often, and are in debt. For the record, I have no debt. I buy for cash. I have never employed margin and tend to own the investments I make for a long, long time.

Retired and soon to be retired investors should place their confidence in the unmatched power of compound interest.

image_printPrint Page

Related

Filed Under: Miracle of Compounding

RSS New From Young Research & Publishing

  • Watch Out for Your Worst Enemy
  • Big Banks Adopting Blockchain for Short-Term Trading
  • Job Market Survival Advice for Graduates and for Those YOU Love
  • BULLWHIPPED? Inventory Overhang Could Slow Growth in Certain Sectors
  • BUY THE DIPS? Can You Catch a Ginsu Knife?
  • MARKET TURNING: Canada’s Housing Market Turmoil
  • “I’ve Been with Richard Young for Over 30 Years Now”
  • All-Powerful Money Managers Voting YOUR Money Targeted by Senate GOP
  • HORDING CASH: Funds Hold the Highest Level of Cash Since 9/11
  • COMMODITY CRUNCH: Will Tesla Buy a Cobalt Mine?

RSS New From Your Survival Guy

  • Watch Out for Your Worst Enemy
  • Job Market Survival Advice for Graduates and for Those YOU Love
  • BUY THE DIPS? Can You Catch a Ginsu Knife?
  • “I’ve Been with Richard Young for Over 30 Years Now”
  • Americans Are Fleeing Cities for Land, Low Taxes, and This…
  • All-Powerful Money Managers Voting YOUR Money Targeted by Senate GOP
  • BE VIGILANT: The Rats Are Scurrying in These Rough Markets
  • Young Americans Fall in Love with Farming, Again
  • Your Survival Guy: “Sell in May, Buy After Labor Day?”
  • Is Your Financial Advisor Hiding the Truth About ESG?

Search Our Site

Richard C. Young & Co., Ltd.

–Client Letter Sign Up–

Sign up to receive email alerts when our latest client letter is posted on our website.

Copyright © 2022 · About Dick Young · Terms & Conditions