The great Albert Einstein once said “Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn't … pays it.”
Understanding compounding is essential for success. Let me say that again- understanding compounding is essential for success.
My mom and Judo coach always used to say "If I could only drill this into your head!" when they were trying to teach me something. Now get the drill out (figuratively speaking)!
The simpliest and most pogient point to make about compounding is the effect grows at an expodential rate. For example, the growth between 1% and 2% is large over time, but it is greater from 2% to 3% and so on. At 8% to 9%, it is not the difference between 1% and 2% times 8. It is an expodential function.
So don't spend or remove your earnings from your portfolio. Drill in into you head that you got to keep "the interest earning on interest earned!"
This is why Buffettt's book is called the snowball. The more snow (interest/dividends) you roll up onto your snowball, the bigger and faster the snowball (portfolio) grows! Buffett's success is a clear example of this.
