The Power of Compounding #2
A very common example to demonstrate the power of compounding is through a question like this:
Which do you choose?
A) Get $10,000 each day for 30 days
B) Get $0.01 on the first day, $0.02 on the second day, $0.04 on the third day, $0.08 on the fourth day... and so on. For 30 days
Well in this context, the answer is obviously B. But i guess it is has more impact visually with the chart below.
Power of compounding tells us that percentage gain will always overtake simple gain, it's just a matter of time. With this knowledge, we know that we should always look return in terms of percentage of our capital.