You have likely heard the adage that, “Compound interest is the greatest invention in human history.”
Earning interest upon interest is a powerful mechanism and is something you should be using to your advantage.
It is best to employ compounding in two ways: compound your debts down with extra principal payments while compounding your assets upward with additional savings. The result is an ever-accelerating increase in your net worth.
For example, $1,000 turns into $1,000,000 with only 27 compounding turns at 30%. If your return is lower than it takes more compounding turns. Active management is the best way that you can control and determine the return rate and how long it will take to earn it. Active management means spending time, money, education, and effort to learn how to get your money to earn more money for you.
For a real-life example, a teenager in California employed quick compounding and within 2 years turned a used cell-phone into a convertible Porsche for himself at age 17. Steven Ortiz began his bartering streak with only a used cellphone as his inventory. He continued trading up to better cellphones, then dirt bikes, laptops, and finally cars. After only 14 trades, in 2 years, he was driving his own Porsche convertible. Steven used two critical elements: speed of transactions and profitable transactions that he created by doing a lot of research. He simply located people who have a valuable item that they were no longer using and then he would then offer them something that they did want so they were happy to swap for it.
Whatever active investing you choose to employ, add compounding to accelerate your investment income and net worth.