Compounding – First Principles 4
Einstein apparently labelled compound interest ‘the eighth wonder of the world.’ But what is it about this simple mathematical concept that got one of the greatest minds of the twentieth century all shook up? Let’s find out…
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That quote by Einstein is in fact only part of the full quotation, which goes like this:
“Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn't, pays it.”
This is profound, and I want to unpack this today. Compounding is perhaps the ultimate financial first principle. It underpins all discussion about building wealth and does so from two angles, just like Einstein said. I mean, who am I to dispute the genius of Einstein?! Let’s attempt to find out what he was on about.
Resources mentioned in this episode
Podcast: Investing in Retirement
Book: Beyond the 4% Rule, by Abraham Okusanya (Amazon affiliate link)
Podcast: Maven Money, with Andy Hart
YouTube: MeaningfulMoney Channel
Spreadsheet: Compounding in action
And, here's a transcript:
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