COMPOUND Interest Chart


A Todd-Chart.... an example, showing the "magical" growth of invested money.... related to "compounding" the annual contributions to an investment plan.... and "re-investing" the annual yield.

Selected from the on-going INTERNET BOOK, "The Doctor's Terrific Tablets"
( http://www.terrific-tabs.com )
by John N. Todd III, M. D. (link)


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See related "tablet": Retirement planning starts when your age is ZERO (link)
AND: Nortonius's advice to his children (link)
AND: Why "the poor" are poor; how "the rich" become rich (link)

Initiated 2/13/06; "doctored" 2/14/06; 2/15/06; 2/25/06; 3/17/06; 4/9/06; 1/07; 2/24/07

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The following financial "growth" chart shows (in column 1) the number-of-years of contribution to an investment plan.... at 10% return per year; on an annual contribution (column 2) of $4000; and (in column 3) the cumulative value of the compounded investment plan; and (in column 4) the cumulative gains above the total contributions; and (column 5) the dollar-gain each year, from the previous year.... indicating a rapidly increasing annual yield.

The last column (column 6) shows the annual ($4000) contribution, minus that year's gain.... indicating a (theoretical) progressive decrease in the "cost" of the $4,000 contribution. (After the 8th year, as the chart shows, the investor generates progressively more and more dollars, above his $4,000 annual contribution.)

(The example showing a 10% annual return can be obtained, for instance, by postulating a 7% annual gain in the value of a common-stock, plus a 3% dividend.... which must be regularly re-invested in the stock. Obviously, there are various other ways to "compound" the principal and the yield of an investment.)

Number of years
Total contributions

$-Value at end of the year shown
Cumulative Gains; above contributions

The year's $-gain above prior year

Relative cost of
$4,000 contribution
1
$4,000
$4,000
$ 0
$ 0
$4,000
2
8,000
8,400
400
400
3,600
3
12,000
13,240
1,324
924
3,076
4
16,000
18,564
2,564
1,240
2,760
5
20,000
24,420
4,420
1,856
2,144
6
24,000
30,862
6,862
2,442
1,558
7
28,000
37,949
9,949
3,087
913
8
32,000
45,744
13,744
3,795
205
9
36,000
54,318
18,318
4,574
- 574
10
40,000
63,750
23,750
5,432
- 1,432
11
44,000
74,125
30,125
6,375
- 2,375
12
48,000
85,537
37,537
7,412
- 3,412
13
52,000
98,090
46,090
8,553
- 4,553
14
56,000
111,900
55,900
9,810
-5,810
15
60,000
127,090
67,090
11,190
- 7,190
16
64,000
143,799
79,799
12,709
- 8,709
17

18

19

20
80,000
229,100
149,100

30
120,000
657,976
537,976

40
160,000
1,770,370
1,610,370


In the chart above, notice what happens to your "dollar-gain" ($-gain), and to your "relative cost", every year, as you compound another annual $4,000 contribution.

RULES: Never-ever "invade" the principal of your investment-plan....
and never-ever dream-up reasons NOT to make a scheduled annual contribution. If you omit just one annual payment.... it will cost you a lot of money to make-up-for (regain) the lost compounding effect.

This chart will be completed, later.... out to 30 years, or more.