Compound Interest: How $300/Month Becomes $1 Million
The math of compound interest is the most important concept in personal finance. Here it is, with real numbers.
What Makes Compound Interest Different
Simple interest: earn on principal only.
Compound interest: earn on principal + previously earned interest.
$10,000 at 8% for 30 years:
- Simple interest: $34,000
- Compound interest: $100,627
$300/Month at 8% Annual Return
| Year | Total Invested | Portfolio Value |
|---|---|---|
| 10 | $36,000 | $55,000 |
| 20 | $72,000 | $176,000 |
| 30 | $108,000 | $447,000 |
| 40 | $144,000 | $1,006,000 |
You invested $144,000. Compound interest did the rest ($862,000).
The Rule of 72
Divide 72 by your annual return = years to double:
- 8% return → doubles every 9 years
- 10% return → doubles every 7.2 years
Starting Early vs Investing More
Investing $200/month from age 22–32 (10 years, $24,000 total) beats investing $200/month from 32–65 (33 years, $79,200 total). The first decade of compounding is worth more than three decades later.
Compound calculator: https://vextorcapital.com/tools/compound-calculator
Investing guide: https://vextorcapital.com/learn/stocks
Not financial advice. Past performance does not guarantee future results.
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