Learn What Is Compounding Rate Of Return In Minutes!
Join 1000's of Authors at StreetArticles Today!

Learn what is compounding rate of return in minutes!

(Simple) Interest is money you can earn by initially investing some money (the principal). A percentage (the interest) of the principal is added to the principal, making your initial investment grow!

But, what is compounding rate of return or compounding interest in layman term? What is the annual compounding interest formula? And...most important of all...how to benefit from knowing the power of compounding interest?

Hi everyone, welcome to Keys Value Investing! Today, we are going to find out exactly what is compounding rate of return in both...layman and value investor point of view!

Let's Find Out what is compounding rate of return

What is compounding interest or compounding rate of return actually?

Compounding rate of return is defined as the interest which is calculated not only on the initial principal but also the accumulated interest of prior periods. Compound interest differs from simple interest in that simple interest is calculated solely as a percentage of the principal sum.

How to calculate compounding rate of return...the easiest way?


Compounding rate of return = Initial capital X ((1+(Compound interest / 100))^Number of years


Say you're 30 now, and planning for retirement by the age of 60. And... you intended to invest $10,000 from your hard-earned saving until 30 years from now (for retirement) at 20% annual compounding interest.

Here's how it works:-

Compounding rate of return = $10,000 X ((1+(20/100))^30

= $ 10,000 X 1.2^30

= $2,373,763.14

That is almost $2.4 million by the time you retired.

Simple? Yes. But it is NOT easy. Because it takes discipline, hard work and most important of all...the RIGHT SKILLS to achieve this.

The GOOD news is: It only takes you few simple lessons and rules to master the SKILLS. Trust your self. It is NOT difficult at all. And it is boring! LOL

Throughout years of "ups and downs", I have learned that, the KEYS of most DIFFICULT "skills" are NOT the technical or fundamental of value investing...but to de-learn the WRONG habits, and psychological weaknesses. (I will show you how in Keys Value Investing site)

Let's move on...

How compounding rate of return can benefit us?

Knowing "how to calculate compounding rate of return" or "what is the formula of compounding interest" is NOT enough. You got to know WHY and HOW it BENEFITED us!

Here's how:-

DOUBLE your money in EVERY few years. With 20% compounding interest (mentioned above), you actually DOUBLE your money EVERY 4 years. In other words, your initial $10,000 become $60,000++ after 10th-year. And $60,000++ become $370,000++ by the 20th year. And $370,000++ become $2.4 million.

The (initial) money DOUBLE every 4-years.

What's next?

Just be consistent, and learn all HOW value-investor did it. Copy exactly their skills and habits. Develop your unique investment philosophy (mentioned in 7-Habits of Value Investor and How To Become A Competent Value Investor)


Today, we have walked through what is compounding interest, how to calculate compounding rate of return and the importance of compounding interest or how it benefited us in value investing. All we have to do now is to decide whether to start learning how a billionaire investor like Warren Buffett has utilized the compounding interest for more than half-decade in accumulating his wealth to whole new level.

Stay tuned, and see you around in my next session of sharing in Keys Value Investing.

If you ever need any feedback or support regarding with the investing know-how and brainstorming discussion, I would be more than happy to connect. Simply leave your comments below and make sure you visit my site regularly as I am always updating it with lots of “A-ha” ideas and information that I come across and I guaranteed that you will find interesting.

Posted by Mike.

Street Talk

No comments present
You May Also Like
Swiss Billionaires Business Office Addresses By Advisor BEN Campbell
Switzerland is not only "super-secret about everything, it is also the center of the economy of the world. Switzerland now has more than $2.5 QUADRILLION in assets. And, most of that is controlled by a group of about 201 SWISS BILLIONAIRES. SWISS BANKERS SWISS BANKERS when they want "contact information"…
By: Ben Campbell1 in  Investing  >  Stocks   Apr 26, 2016  
  Likes: 0

How Does Capital Properties FX Help You Learn Forex Trading Step - by - step
At Capital Properties FX, we are a young team of highly dedicated professionals with over 7 years of experience in online currency trading. If you plan to dive into the lucrative world of forex trading, we can help you learn everything you need in the least amount of time. Our…
By: davidjack2 in  Investing  >  Stocks   Jan 21, 2016  
  Likes: 0

Bookkeeping Monster Offers You Best Bookkeeping Service By Experts
The systematic way of classifying, recording and also reporting of financial transactions in large, medium and small companies is known as bookkeeping. By outsourcing such services is an essential bookkeeping prerequisite for each company. Any pivotal data ought to never be neglected in light of the fact that the subsequent…
By: Mike Jensen in  Investing  >  Stocks   Oct 28, 2015  
  Likes: 0

Tax Free Investments Available for Frisco TX Investors
Many are familiar with Roth IRAs and traditional IRAs as types of investments that are tax free, but they are not the only tax free investments Frisco TX residents can take advantage of. Although IRAs are effective places to park your money until retirement, there are several other ways to…
By: Stephen Cheung in  Investing  >  Stocks   Aug 10, 2015  
  Likes: 0

2015, The New 2008
It has been 7 years since the financial crisis of 2008 gripped the world, although it still makes the news on a regular basis. Perhaps in order to avoid chaos, just before the crash many leaders were quoted as saying everything was fine and knowing that it wasn’t. “The subprime…
By: michael61 in  Investing  >  Stocks   Dec 30, 2014  
  Likes: 0

Forex Trading Tools: Developing Your Skills for Consistent Profits
Foreign exchange is recognised as the most liquid of all financial markets because it involves trading on a global level. This means everyone from individuals to corporations, banks, and governments can participate and do so with other goals in mind rather than just for investment. News and events at the…
By: Ondrej Machacek in  Investing  >  Stocks   Aug 12, 2015  
  Likes: 0

Want to Know More About Forex? A Great Article Awaits!
Forex trading opens up great opportunities for making a profit, but also great opportunities for making a loss, especially for inexperienced and undisciplined traders. However, there are always ways to increase your chances of making a profit and reducing risks. The currency exchange market is hungry for savvy traders who…
By: Ondrej Machacek in  Investing  >  Stocks   Oct 27, 2015  
  Likes: 0

Online Trading In India -
Our UFXMarkets winding up their worldwide service through online Forex trading company, Forex trading in India, Forex trading online India, online commodities trading, UFXmarkets, online futures trading, stock indices for an assortment of online trading community. The top most online commodities Trading are giving their world services by esteemed trading…
By: ufxmarkets in  Investing  >  Stocks   Dec 24, 2013  
  Likes: 0

What You Need to Know When Looking at Short Term Investment Strategies
As a general rule, investing should be considered as a long-term game, with most independent financial advisers keen to point out you should be looking to keep your investments in place for at least five years, but there are situations in which you would be looking for more short term…
By: Don Meyer in  Investing  >  Stocks   Apr 17, 2011  
  Likes: 0

Getting the Best From Your Stock Investment Strategies
Are you looking to get the best from your stock investment strategies? When it comes to investing, investors first need to decide on whether to choose a strategy where they are personally responsible for choosing their own stock picks or whether to find a fund to invest their money for…
By: Don Meyer in  Investing  >  Stocks   Mar 29, 2011  
  Likes: 0

Bank Of Canada Rate Decision Serves As Warning
The Bank of Canada isn’t in the habit of suddenly changing course on its monetary policy, or making snap decisions. Monetary policy is planned out years in advance, using the best economic data available at the time. When circumstances change, policy has buffers built in to cushion the shock, so…
By: michael61 in  Investing  >  Stocks   Jan 22, 2015  
  Likes: 0

Writing Covered Calls The Long Term Stock Strategy
For years getting stock and keeping it until you retired or possibly until the share price had gone up considerably had been the most popular approach. However, with stock markets domestic and even abroad in unclear terrain quite a few people are starting to seek out another answer to the…
By: Spencer Fitzpatrick in  Investing  >  Stocks   Feb 02, 2012  
  Likes: 1

Things You Should Be Careful With When Trading Forex
Hitting a slump isn't uncommon in the trading world and losing streaks are no reason to go packing ever so easily. Every Forex trader gets into a slump at one point or another in his career. In fact, even the most profitable and successful pros have had their own time…
By: Ondrej Machacek in  Investing  >  Stocks   Sep 29, 2015  
  Likes: 0

There Will Be No Qe4
Today’s FOMC meeting was a stunner to the markets. The Federal Reserve has been saying they will raise interest rates for months now, but nobody actually believes them, because, as everyone knows, the economy isn’t anywhere near as strong as the FED says it is. For the past 6 years,…
By: michael61 in  Investing  >  Stocks   Feb 01, 2015  
  Likes: 0

Money Printing is Not Inflationary
The FED says it has injected over 4 trillion US dollars into the economy with its “QE” program, over the course of 6 years, give or take. The stated intention was to create 2% inflation, because apparently this is the sweet spot percentage which benefits the most people in the…
By: michael61 in  Investing  >  Stocks   Jan 25, 2015  
  Likes: 0

Article Views: 1243    Report this Article