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Smart Investing: Growing Your Wealth Over Time
The Power of Compound Interest
Compound interest is often called the "eighth wonder of the world" because:
- You earn interest on your interest
- Small regular investments grow significantly over time
- Starting early makes a huge difference
- Example: $10,000 at 7% for 30 years = $76,123
Historical Market Returns
| Asset Class | Avg Annual Return | Risk Level |
|---|---|---|
| S&P 500 (Stocks) | ~10% | High |
| Corporate Bonds | ~5-6% | Medium |
| Government Bonds | ~3-4% | Low |
| Savings Accounts | ~1-2% | Very Low |
5 Key Investment Principles
- Start early: Time is your greatest asset in investing
- Diversify: Don't put all eggs in one basket
- Think long-term: Avoid reacting to short-term market moves
- Keep costs low: High fees eat into returns
- Automate investing: Set up regular contributions
Pro Tip: The Rule of 72 estimates how long it takes to double your money. Divide 72 by your expected return rate. At 7% return, your money doubles every ~10 years (72/7 = 10.3).