When illustrating the benefits of investing early so that compounding can take place,
a stable return rate are usually use, simply because its easier that way.
The truth is that actual compounding doesn’t take place that way, and in some situations may result in your assets having a challenging time breaking even (instead of growing assets)
A simple illustration of the power of compounding
In this article I referenced 7 years ago,
Richard Russell illustrates the power of early investment and how the power of compounding can build wealth.
The returns here are illustrated using a standard 10% growth rate. The wealth picture looks real good.
But does assets in real life grow at a standard x% for 60 years? The reality is that it doesn’t.
On a long term trend, there are much volatility, which is when the price of your asset fluctuates and do not end ......