How to grow your wealth over time: the power of compounding

When you earn returns not only on your initial investment but also on the accumulated earnings from previous periods, the growth of your investment becomes exponential.

Compound interest is the eighth wonder of the world. He who understands it earns it. He who doesn’t pays it.

– Albert Einstein

For example, if you invest CHF 1,000,000 at an annual interest rate of 5%, you would earn CHF 50,000 in the first year, making your total CHF 1,050,000. In the second year, you would earn 5% on CHF 1,050,000, which is CHF 52,500, and so on. Over time, this compounding effect can significantly increase the value of your investment. After 15 years, you will have doubled your initial investment. This is the power of compounding. Compounding occurs when the income (dividends or interest) you earn on an investment is reinvested, earning you more returns.

Start early. The longer you stay invested, the more you will benefit from the snowball effect of compounding, as your investment base keeps getting larger over time.

The big money is not in the buying or selling, but in the waiting.

– Charlie Munger

Growing your wealth takes time, patience, and compounded earnings.