What Compound Interest Can Do
Compounding can have a dramatic effect over time.
Let's pretend you invested $10,000 in the All Ordinaries Index on the 15th of December 1984. Today, you would have amassed $115,815! At a compounded annual growth rate (CAGR) of 6.26% a year (not including dividends).
To give a better perspective, I will use the S&P 500 for reference. In this case, $10,000 invested on the same date would be $160,684 today! Not including dividends and a CAGR of 8.51% a year.
$160,000 after 34 years might not sound like a lot to some people. But remember, this is with an initial investment of $10,000 and no more. If you invested an additional $10,000 each year, well this number would be quite substantial.
Let's assume you invested another $10,000 yearly with a CAGR of 8.51%. The average return the S&P 500 has provided over the foregoing period. Instead of $160,684, you would now have $1,931,351. With a total savings of $340,000 and $1,581,351 of generated interest!