Today I want to talk to you about the great scientist Albert Einstein. He revolutionized the 20th century. When we begin manned missions to the stars in 100 years or so, his principles will guide the whole endeavor.
Unbeknownst to many, Einstein made a
foray into the world of finance and economics. He pioneered the concept of
compounding interest. Let me give you a simple example as follows with a growth
in the account of 10% per year:
2021: Account balance $100
Interest earned: $ 10
Ending balance: $110
2022 Ending balance: $121
2023 Ending balance: $133.18
2024 Ending balance: $146.41
2025 Ending balance: $161.05
2026 Ending balance: $177.16
2027 Ending balance: $194.88
2028 Ending balance: $216.32
In this theoretical exercise, you have
doubled your money in 7 years. The real world is different. We have inflation.
You might not be guaranteed a 10% average return each year unless you invest in
a truly excellent mutual fund or have a brilliant fund manager like Ray Dalio
handling your amount. You also might want to make contributions to the account
each year. With all these variables you would need a very good computer program
to predict the results. The principle still will work then.
In a country like the US, Canada, Spain,
etc., if you put money in a savings account, you might get 2% in annual
interest payments. A good fund manager can give you an average return of 10% a
year. In inflation-ravaged countries, you must play an entirely different game.
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