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One of the most important questions new investors are asked is, “How can I use the money I have today to make more money over time?” You will find the answer in the name of a strong idea Compound. Here’s how it might work.

Principal The amount of money you invest at the beginning of your journey. When you invest this money in a fund, after one year, you get a percentage of the return, adding to your bottom line.

It’s not too much at first, but it speeds up the compounding process – Einstein called it the eighth wonder of the world.

Things get interesting when you add your last year’s earnings to your principal, because now you’re starting with a large amount of money. If you reinvest this new and larger principal in the same fund, your earnings next year could be a large percentage.

And here’s the magic, because if you repeat this process year after year, you’ll see that it can have a snowball effect.

Let’s look at some number of plug-in verb compounds. Let’s say you start with $ 1,000 – that’s your main. You invest it in a stock fund with an average annual return of 12%. At the end of the first year, you earned $ 120 not bad!

Add it to your original amount, and now that you have $ 1,120 you can reinvest in the same fund. Now that same 12% annual return will give you শেষে 134.40 at the end of the second year.

Add it to your total – and as many years as you want to stay invested. At the end of 30 years, your original 1,000 will become, 29,959.92!

And that way you can already make money from your money. It takes patience and discipline to continue reinvesting your returns, but it can be well worth it. It’s compound magic. To learn more about compounding, visit

Important information

All investments are at risk, including the potential loss of money you invest.

There is no guarantee that any specific asset allocation or combination of funds will meet your investment objectives or give you a certain income level.

© 2020 The Vanguard Group, Inc. All rights reserved.

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