The Magic of Compounding Interest
Let’s look at a simple example of $100 invested in a bank account and earning an interest rate of 10% compounded annually. The table below shows the incremental effect of compounding interest compared to simple interest.
Year 1 Simple Interest = $100x10% = $10. Compound Interest = $100x10% = $10 Year 2 Simple Interest = $100x10% = $10. Compound Interest = $110x10% = $11 Year 3 Simple Interest = $100x10% = $10. Compound Interest = $121x10% =$12.10 We’ll, you say, that’s not so much. The big effect takes place when the compounding is done over many intervals. Over long periods of time the magic of compounding can have an amazing effect on the accumulation of wealth. Assume you start off with $10,000. Lets say your bring in 12% per quarter by using conservative option-selling techniques. At the end of 30 years your $10,000 will have grown to an astonishing $347,110.
Albert Einstein, one of the world‘s all-time great minds, is often quoted “The most powerful force in the universe is compound interest”. If you are generating periodic income and don’t need to spend that income, put it into a wealth-building program by compounding it. The periodic premiums generated using a safe option-selling program are ideal for this. Consider it especially in a tax-deferred account such as an
IRA
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