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Power of Compounding Interest Part II


Lazy Man and Money left an excellent comment on the Power of Compounding Interest article. In fact, I thought that I would write another quick article addressing his comment. To see his words of wisdom, go to Power of Compounding Interest. You'll notice that I responded to what he said, but I also wanted to post it on the main page as well.

Lazy Man and Money basically said that the idea of compounding interest is good as a whole, but a lot of people leave out the fact that the taxes and inflation kill the ending value of your investment.

If you read my reply, you'll see that I addressed that. I feel that everyone should know about compounding interest because it's an invaluable tool. Once you consider taxes, inflation, and costs over the years, you end up with less than what I originally showed. However, you still have a considerable amount of money that you otherwise would not have had.

My intent was to not deceive anyone. My intent was to show the power of compounding interest and to show that for a minimal investment, this is what happens over the years. Inflation, taxes, and costs will lower the overall value of the investment, but knowing about the principal and taking advantage of it will gain you a lot more money than if you simply didn't do anything.

Let me know your thoughts on this by leaving a comment. Simply click on the "comments" link below and follow the instructions.

Thanks for the recognition.

I think you covered it very well - especially adding investing fees which I forgot. At least those can be minimized greatly depending on how you invest.

I often wonder what percentage of the population doesn't know about the power of compound interest.

The power of compounding real estate "interest" is even more interesting. Go to my blog and read:

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