The power of compounding: A phenominal force in investing

Compounding is the factor that calculates what an investment is worth over time for a given return rate-and its power is truly extraordinary.

Let’s take a closer look:

  • Stars Model vs. S&P: Investing in the Stars model (30% TQQQ at 20% per year) over 30 years yields 24 times more profit compared to the S&P (8% per year).
  • 15-Year Impact: A 20% TQQQ investment compounding at 25% annually grows to be 28 times more valuable in just 15 years.
  • Market vs. Bonds: Opting for bonds over the market for 5 years while the Stars model (20% TQQQ) compounds at 33% annually would result in 2.7x underperformance in just 5 years.

The lesson? The combination of high returns and long time horizons makes compounding a game-changer.

Whether you’re investing for the long haul or considering your options, understanding and leveraging the power of compounding can redefine your financial future.