Compound interest is interest earned on previously earned interest. Einstein allegedly called it "the 8th wonder of the world". Buffett: "My wealth has come from a combination of living in America, some lucky genes, and compound interest."
📊 Power of Compounding
- $10,000 at 10%/year = $25,937 after 10 years (1.6x more vs simple interest)
- $10,000 at 10% over 40 years = $452,592 (45x!)
- Most of the growth happens in the LAST decade
🎯 Real Examples
- S&P 500 1990-2025 (35 years, ~10%/year): $10k → $280,000
- Buffett at age 50: $300M. At age 90: $100B (300x in 40 years through compounding)
📈 How to Maximize
- Start early: Time is the most powerful factor
- Reinvest dividends: Automatic compounding
- Higher rate: 12% vs 7% over 30 years = 3x difference
- Don't interrupt: Avoid withdrawing — let it grow