Compound interest is what Einstein described as mankind’s greatest invention and, when coupled with the types of historic returns from Indexes like the Dow Jones, one of the strongest arguments you’ll find for getting some good advice and sticking to a long-term investment strategy.
Now, this wouldn’t be the first time I’ve cited Albert Einstein as having described compound interest as ‘mankind’s greatest discovery.’ Perhaps of little wonder too, that the renowned theoretical physicist who was so inspired as a child by a compass – he thought there must be some force in what was presumed empty space that acted on it – would later find so much satisfaction in formulas that help explain some of the most powerful invisible forces in the universe.
Corporates are focused on the long-term for increasing stock values in the current low borrowing cost environment, individuals are more focused on the short-term and reducing upfront costs than considering the long-term outlook and compound interest potential. In fact, that’s been a key storyline for the last eight years of this secular bull, from the period of stock market recovery (March 2009 to late 2013) and onto the new equity bull market of the past 3 ½ years.
While I confess that I’m not much of a Trekkie, given the abundance of what is arguably extremely “illogical thinking” amongst the investor community over the last few years, maybe a Vulcan’s view of Wall Street this morning is in order.