21 Apr 2020
Principles of Investing: Power of Compounding
- Posted by Dejan Pekic BCom DipFP CFP GAICD, Senior Financial Planner
According to Albert Einstein…
“Compound interest is the eighth wonder of the world.
He who understands it, earns it…he who doesn’t, pays it.”
If you save and invest the same amount of money in the first 10 years and stop versus saving that same amount again over the subsequent 10 years, all things being equal, the first lot will be 1.7 times greater today.
Why? Because the first lot of savings has been allowed to continue to compound the earnings for a further decade.
Click for chart.
This now brings us to our point, withdrawing $20,000 from superannuation ($10,000 this financial year and $10,000 next financial year) as a result of the COVID-19 pandemic should only be done as an absolute last resort.
And only when all other financial resources are exhausted.
It is guaranteed to negatively impact the retirement capital of every individual who makes the withdrawal.
Now is the time to buy and take advantage of this market crash, it is not the time to sell.
WARNING, this does not constitute Personal Advice and to discuss if this is appropriate for your given circumstances please do not hesitate to contact us directly.
At Newealth we are always looking to support and promote our clients wherever possible and if you have any ideas or comments, please feel free to email me or to call me on +61 2 9267 2322.