Return assumptions as a lesson on compounding The
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Posted On: 01/20/2024 5:41:08 AM
Return assumptions as a lesson on compounding
The point of her example was not to expect a 12% average rate of return on your money, Orman told CNBC.com. Instead, it was intended to teach young investors what time and compounding can do, she said.
“You have no idea how many kids have said to me, ‘When I heard that I immediately opened a Roth IRA, I immediately started to put money in it,’” Orman said.
Young investors should start right now and should not wait, she said. The reason comes down to a concept called compound interest — that both the money you initially invest and the interest earned on that money will continue to grow.
The point of her example was not to expect a 12% average rate of return on your money, Orman told CNBC.com. Instead, it was intended to teach young investors what time and compounding can do, she said.
“You have no idea how many kids have said to me, ‘When I heard that I immediately opened a Roth IRA, I immediately started to put money in it,’” Orman said.
Young investors should start right now and should not wait, she said. The reason comes down to a concept called compound interest — that both the money you initially invest and the interest earned on that money will continue to grow.
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