After conversing with various individuals, I realise many do not truly understand the power of compounding. In the following example, it shows 3 different individuals who starts investing in the same fund at different points in their life. We would assume that the long term average returns of the fund is 7%.
Individual A: Invests $5,000 each year from age 25 to 60.
Individual B: Invests $5,000 each year from age 25 to 35.
Individual C: Invests $5,000 each year from age 35 to 60.
As expected, Individual A who started investing at a much earlier age of 25-years has the largest portfolio out of the three. However, one has to note the huge difference Individual A has compared to the other two for just investing 10-years earlier. Furthermore, Individual B ends up with more money than Individual C, despite the latter investing 2.5x more money than ......