The Power Of Slow Compounding

11 days ago
3 Min Read
594 Words

Everyone wants the get rich quick schemes. This is especially true in cryptocurrency. Talk, especially during bull runs, is of Lambos and mansions. Most want to be rich.

Certainly there is nothing wrong with that. Financial abundance is something that everyone should have. However, the get rich quick schemes, when not scams, are also get poor quick when things head down the other side.

The popping of bubbles can be very painful.

Few take the time to consider the true power of slow compounding. Obviously, this generates some big numbers over time yet it is also providing resiliency.

Here is a video from billionaire investor Chamath Palihapitiya. He discusses what he believes it the best company right now due to its long term growth. Also, he mentions in their how he would prefer to have a 15% annual growth rate for like 50 years.

The video is only a few minutes and well worth the time.

So what does $1,000 do over a long period of time. While not going out 50 years, let us see.

Year 1 $1,150.00
Year 2 $1,322.50
Year 3 $1,520.88
Year 4 $1,764.22
Year 5 $2,028.85
Year 6 $2,353.46
Year 7 $2,706.48
Year 8 $3,112.45
Year 9 $3,579.32
Year 10 $4,116.22

Yeah, pretty boring isn't it? No Lambos or mansions at this rate. Nevertheless, in a decade, at 15%, 1,000 became more than $4,100. That is not too bad.

However, things can start to get nuts from here.

Year 11 $4,733.65
Year 12 $5,443.70
Year 13 $6,260.25
Year 14 $7,199.29
Year 15 $8,351.18
Year 16 $9,603.85
Year 17 $11,044.43
Year 18 $12,701.10
Year 19 $14,606.26
Year 20 $16,943.26

That is a much bigger jump. Again, no Lambos but that is a healthy amount of money. To take $1,000, put no more money in, and let it compound over 20 years, we will have near $17,000.

Shall we go out a bit further?

Year 21 $19,484.75
Year 22 $22,407.46
Year 23 $25,768.58
Year 24 $29,633.87
Year 25 $34,078.95
Year 26 $39,190.80
Year 27 $45,069.42
Year 28 $51,829.83
Year 29 $59,604.30
Year 30 $68,544.95

Wow. $1,000 over 30 years, compounding at 15% annually is almost $70,000.

Is there anyone here who would be upset by that?

Of course, we know in the crypto world, the opportunity for outsized returns is possible, thus achieving a return of greater than 15% can be achieved.

The point is boring growth can really add up over time. Warren Buffet became the richest man in the world by getting around a 20% return for decades. At the same time, the wealthiest on Forbes list did not do it overnight.

Let's look at the names.

Elon Musk: Tesla Started 2003
Jeff Bezos: Amazon Started 1994
Bill Gates: Microsoft Started 1975
Bernard Arnault: Louis Vitton Started 1854
Mark Zuckerberg: Facebook Started 2004

Naturally the technology people made it to the top of the list faster than some of the old traditional industries and investors. However, they did it over a relatively long period of time. It was not a matter of hitting it big within a couple years.

The idea behind a project like @lbi-token is to Get Rich Slowly. There will be times when these returns are far outpaced. We will consider this gravy. However, for this decade, if we can just progress ahead at the pace of 20%, we will see much larger numbers than this chart shows.

That is the baseline we operate from and, so far, it serve us well in the other projects.

Article done by @taskmaster4450le

Posted Using LeoFinance Beta