The magic of compounding

One of the most important concepts you will ever learn is the effect of compounding.   

Compounding growth is effectively a process whereby the value of an asset increases exponentially over time, in lay man’s terms, the effect can be thought of as ‘growth-on-growth’.

The long term process of creating wealth essentially gathers speed over time, because as your assets grow, the actual dollar return in a future period will also grow.

In other words, wealth creation is function of the size of your asset base and time. As time goes by, the value of your assets increase and so does the amount by which your portfolio grows.

This is the magic of compounding.

Lets explain it.

Imagine you meet a genie and get granted a choice between two cash gifts.

You are given the choice of $1million dollars upfront or a magical one cent piece that doubles in value every day for 30 days.

Which one do you take?

 

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