Compound Interest.. what can I say.. WOW!

As I was explaining to Liz yesterday, Einstein once said, “The most powerful force in the universe is compound interest”. And I tried to explain to her what I meant by it. I think this spreadsheet which I quickly created in Excel displays it nicely.

Look at what you could do with a mere 10% a year on $10,000. Not a lot of money by todays standards. Even if I borrowed that much money.. I’m pretty sure I could get my 10% with the knowledge and experience I have.. The column on the far left represents the end of the year.

That’s 74 THOUSAND dollars on a mesely 10% interest PER YEAR (used the other percentages to see how gross it gets after long periods of time)! I know it’s always one of those ‘easier said than done’ types of scenarios. And that is most definitely true. However that is SERIOUS money. When I was playing virtual 100K tournaments on umoo.com, here is the record of my winnings.. these are daily.

Not too bad eh?? I especially like the 20% day (I won the tournament by about $7000). The tournament would run and they would generally have 50-70 people in them. A few variables which you have to consider here of course.

• this is fake money, and almost everyone is a little more ‘free’ with fake money. However that being said, I did ‘invest’ money to play the tournament, so it wasn’t totally free.
• I was able to short whatever I wanted, whenever I wanted. This is not typical of real world trading (for the most part). I will go into this in detail in a later post
• the maximum position I could have in any given stock was $20,000 worth. So I stuck to small priced stocks (less than $7) and would play them up and down almost all day… very in ‘tune’ with the market. I would also have all 5 positions going at once, pretty much ‘all in’ the whole time I was playing the market.

My over-all point with this is that it is VERY possible to make the money that is displayed in the first spreadsheet. Hell, in 8 trading days, I was able to create a 40% profit on $100,000. And that was also resetting it to 100,000 every day (which is a great way to trade in my opinion). I don’t have a 40% column in my spreadsheet, but if I did.. the number at the end of 20 years would be 11.7 million dollars. Yep.. I think I could retire on that!

I am now 32 years old.. see you in 20 years The fun starts soon.

Related posts:

1. The Best Two Financial Screenshots you’ll ever see…
2. Almost 4 years since my last post.. wow.
3. Free Money! Make your Mortgage Tax Deductible – Intro to the Smith Manoeuvre
4. Found My Investment Vehicle!.. Zoom Zoom!
5. RRSP Deadline is soon, and I’m making some moves.