The Power of Compounded Returns

Compounding is a powerful force. When returns are reinvested, the investment’s value can grow exponentially over time.

• Consider a hypothetical $10,000 investment earning 10% a year, the S&P 500 Index’s approximate annualized return since 1926. Over a 45-year working lifetime (age 20 to 65), $10,000 would have grown to $728,905.
• At a 10% annual return, an investment doubles in value about every seven years. So, the earlier you start investing, the larger the potential compounding effect.
• For example, investing $10,000 at age 20 would result in a much higher end value at age 65 than investing the same amount at age 30 or 40.