Читать книгу More Straight Talk on Investing - John J. Brennan - Страница 31

If you believe that the economy will grow over the long term, time will be your greatest ally in accumulating wealth. That's because of the power of compounding. Compounding is what happens when you invest a sum of money and then reinvest the earnings instead of withdrawing them. Your nest egg grows much faster because those prudently reinvested interest payments, dividends, or capital gains in turn generate further earnings. My friend at a competitor firm, Mellody Hobson, aptly observes, “We talk about long-term patient investing, and that idea that slow and steady does win the race, that time can be your best friend when it comes to investing. That's why we have a turtle as a logo at Ariel.”

So, think tortoise, not hare. The longer you invest, the effects of compounding are all the more astonishing. Consider the simple example shown in Figure 2.3. Suppose you invest $5,000 in a tax-advantaged account at the start of each year for 10 years and then contribute nothing more. Next, suppose that the account earns 8% a year, after expenses, and that you have all of your earnings reinvested in the account. After 25 years, you would have more than $248,000, of which only $50,000 came from your pocket. And after 40 years, that sum would have grown to more than $787,000. The power of compounding is absolutely amazing.

Figure 2.3 The Power of Compounding

Source: Vanguard

Here's a point that requires special emphasis. If you're going to make the most of the power of compounding, you must reinvest all the income and dividends that you earn on your investments instead of taking them in cash. You must also keep your hands off the money in your accounts. If you repeatedly dip into your long-term accounts to pay for living expenses or big splurges, your wealth won't grow as efficiently as it could otherwise. Like a chef who keeps sampling the food while it's cooking, you're apt to end up with a lot less in the pot than you planned.