This is the growing snowball of money, where interest is calculated on previously earned interest. In each reporting period, we start with a larger sum than in the previous period. The result is increasing profitability. The more money, the more new money they generate.
Ordinary people rarely delve into this mathematics. Few understand the magical power of compound interest. Even fewer put it into practice. That’s why there are few true capitalists and many ordinary people. That’s how processes work in our world: some know and utilize, while others don’t know and don’t use it.
For clarity, let’s see how this works with real numbers. Imagine you have $1,000 that you invest at 15% annually. Here’s how the growth will look over the years:
- Year 1 = 15% of $1,000 = $150
- Year 2 = 15% of $1,150 = $198
- Year 3 = 15% of $1,332 = $228
- Year 4 = 15% of $1,520 = $262
- Year 5 = 15% of $1,748 = $301
- Year 6 = 15% of $2,010 = $347
- Year 7 = 15% of $2,311 = $399
- Year 8 = 15% of $2,657 = $458
- Year 9 = 15% of $3,055 = $526
- Year 10 = 15% of $3,513 = $605
- Year 15 = 15% of $7,075 = $1,220
- Year 20 = 15% of $14,232 = $2,455
- Year 25 = 15% of $28,625 = $4,938
- Year 30 = 15% of $32,919 = $9,932
- Year 35 = 15% of $115,805 = $19,976
- Year 40 = 15% of $232,925 = $40,180
Over 40 years, our $1,000 has turned into $232,000 and brings in $40,000 in dividends annually.
Well, can you live on that? Note that you made the investment only ONCE. But due to compound interest, which was applied each year, you’ve received a substantial sum.
In 1626, American colonists bought Manhattan Island (now the cultural and financial center of New York) from the Native Americans for just $24. Adjusted for inflation over 400 years, that’s only $1,000 in today’s money. Impressive? Many have heard this story and often lament the poor Native Americans who sold such valuable land so cheaply.
However, what if the Native Americans had invested that money at just 10% interest?
- 10 years at 10% = $2,593
- 30 years at 10% = $17,450
- 15 years at 10% = $117,390
- 100 years at 10% = $13,780,600
- 200 years at 10% = $189,905,276,460
- 300 years at 10% = $2,617,010,996,398
- 400 years at 10% = $36,064,014,027,524,403,200
To put it in perspective: Current U.S. GDP = $18,000,000,000,000 ‘Native American’ income = $36,064,014,027,524,403,200
A thousand dollars might not impress you, but compound interest is that thing that left a very powerful impression on me in my childhood. Because it proves that INTELLIGENCE conquers CIRCUMSTANCES. It doesn’t matter how lucky you are, born into a wealthy or poor family, in a good country or one plagued by corruption, whether you possess wealth or work at a KFC fast-food joint. Circumstances don’t matter! If you have intelligence, you can radically change your life through investment and compound interest. All you need is the intelligence to make a decision and follow it.
Can you tell me more about compound interest?
For over two centuries, the Rothschild clan has been the planet’s leading force. These individuals are not keen on showcasing their true power and the actual magnitude of their wealth. According to the most conservative estimates by experts, it surpasses 3.2 trillion dollars. If it’s difficult for you to imagine, 1 trillion in $100 bills looks like this: Russia’s annual budget equals 0.3 trillion. Ukraine’s annual budget is 0.03 trillion. In general, a trillion is an ASTOUNDING AMOUNT! And the Rothschilds have several of them. For two hundred years, this clan has only grown richer. They carry the weight of many deeds, including revolutions, wars, and banking schemes. But this is all TACTICS (tools for capital increase). So, what about the STRATEGY (overall plan)? The Rothschilds rarely let their tongues slip. Especially in the last hundred years. However, the dynasty’s founder was less cautious and once let slip: ‘COMPOUND INTEREST – A MARVEL! THE EIGHTH WONDER OF THE WORLD!’ This was said by the world’s richest man. A hundred years later, the smartest man in the world said: ‘COMPOUND INTEREST – THE GREATEST MATHEMATICAL DISCOVERY OF ALL TIME.’ That man was Albert Einstein. Another hundred years later, an unremarkable young man stumbled upon this information and was amazed by the power and logic encapsulated within. That man, many years ago, was me. Today, I will tell you why I was amazed back then. And at the end of this article, I will provide a mathematical scheme on how to do with money what Baron Rothschild did.