The Power of Uninterrupted Compound Interest

It is difficult to learn this concept for the first time. But uninterrupted compound interest can turn small accounts into life-changing amounts. With a simple plan and enough time, anyone can get rich.

With the explanation and examples below, you will see how compound interest works. And why it’s better not to be interrupted. But not only that, you’ll get insights from some of the world’s leading thinkers and investors. By following their example, you can improve your yields…

What is Uninterrupted Compound Interest?

The power of compound interest comes from reinvestment. Or more so, just stay invested. Let’s take a look at this chart that shows how interest is compounded…

 Year Begin Interest End 1 \$100 \$10 \$110 2 \$110 \$11 \$121 3 \$121 \$12.10 \$133.10

This shows how \$100 increases by 10% each year. In the first year, you start with \$100 and receive \$10 in interest (\$100 x 10%). That then gives you \$110 to start the second year…

Then, a 10% return on \$110 gives you \$11 in interest in the second year. Every year it continues and the interest grows. This assumes that you let uninterrupted compound interest continue to work for you. Some people pull it off early, reducing long-term returns.

It’s not huge short-term numbers, but the further you go the more important it becomes. Here is the same example that shows the 30s, 40s and 50s…

 Year Begin Interest End 30 \$1,586 \$159 \$1,745 40 \$4,114 \$411 \$4,526 50 \$10,672 \$1,067 \$11,739

These are solid feedback! Do not hesitate to consult this free dividend calculator and here is also an investment calculator. You can try out some examples to see how your investment accounts can grow. For example, here’s a screenshot of that same 10-year investment example…

Best Compound Interest Quotes

The best investors in the world know the power of compound interest. To start, here is a quote from Warren Buffett…

My life has been a product of compound interest.

If Warren Buffett had stopped investing at the age of 50, few people would know his name today. This is because 99% of its wealth came later his 50th birthday. Thanks to the power of compounding, his last years of life see much higher returns. It is not because the annual percentage returns are higher. Instead, it’s the change in total dollars as his wallet grows.

And here is the wisdom of Charlie Munger…

The first rule of composition is never to interrupt it unnecessarily.

If you can follow this simple rule, you can grow your portfolio to new heights. And to go further, compound interest is not limited to investing. This last quote is often attributed to Albert Einstein…

Compound interest is the eighth wonder of the world. Whoever understands it, earns it… whoever doesn’t understand it…pays it.

We tend to think linearly, but many things in our world are changing exponentially. But I digress, let’s look at one last important piece of composition…

Find the best uninterrupted returns

With the quotes and examples above, you see the power of uninterrupted compound interest for many years. However, one challenge is finding the best investments…

There are many strengths to choose from. For example, you have commodities, real estate, cryptos, stocks, and many more. Even if, over the long term, only one of these assets tends to outperform the others…

Stocks have returned around 8-12% annually. There is a lot of volatility in any given year, or even a few years. But over the long term, these average annual returns outperform other assets.

On top of that, you can buy the best stocks with no transaction fees today and you don’t have to do any extra work. Real estate, on the other hand, comes with high fees, maintenance, insurance, taxes, and more. And for another comparison, commodities like gold do not produce any ongoing value such as dividends. Gold is only worth what the next person is willing to pay for it.

Of course, each asset class has unique advantages and it can be good to diversify. However, many of the best investors in the world focus on stocks and play for the long term. As you have now seen, uninterrupted compound interest is a beautiful thing.

If you’re looking for some of the best investment opportunities, check out these free investment newsletters. They are packed with information from investment experts. And as always, it’s good to keep exploring lots of investment ideas. Over the years you will connect more dots and this can lead to even better returns.

Brian Kehm graduated from Iowa State University with a double major in finance and accounting. After graduating, he went to work for a cryptocurrency company in Beijing. Upon returning to the United States, he began working with financial publishers and also passed the CFA exams. When Brian isn’t researching and sharing ideas online, you can usually find him rock climbing or exploring the great outdoors.