It has been claimed that Albert Einstein referred to compound interest as the eighth wonder of the world. Compounding occurs when interest is added to the principal, thereby enabling the interest to earn interest in the future. In other words, it is using the money that money makes to make more money. The nonlinear gains that arise from compounding over many years can result in the accumulation of great wealth. For this reason, compounding plays an important role in many investing strategies."
If the Indians had invested the $24 they got from the Dutch when they bought Manhattan in the 1600's at 1% with compound interest, they could buy the island back, lock, stock, and barrel. Or so a finance professor told me in the 1980's.
Thomas Sowell: There are no solutions, just trade-offs.
