title: The Magic of Compound Interest description: [AFW S.2.3] Investment Principle #3 published: true date: 2026-06-30T08:07:51.612Z tags: editor: markdown dateCreated: 2021-04-19T03:55:22.384Z

What is Compound Interest¶

It's interest that grows on the original principle, and then earns interest which is compounded on the whole amount and so on...

"Compound interest is the eighth wonder of the world. He who understands it, earns it ... he who doesn't ... pays it." -Albert Einstein

“If you understand the math behind compounding you realize the most important question is not ‘How can I earn the highest returns?’ It’s ‘What are the best returns I can sustain for the longest period of time?’” -Morgan Housel

“My wealth has come from a combination of living in America, some lucky genes, and compound interest.” ―Warren Buffett

“I don’t know what the seven wonders of the world are, but I know the eighth, compound interest.” ―Baron Rothschild

“We believe that, in general, compounding income over time — not style, sector, or asset class — is the most reliable driver of long-term returns.” ―Miller / Howard Investments

Watch Explaining Compound Interest (2023-04) VIDEO

Watch Dave Ramsey's 5-minute video VIDEO

The Rule of 72¶

Examples of Compound Interest¶