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How Small Investments Make a Big Impact Over Time

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See this visualization first on the Voronoi app.

This bar chart shows the power of compound interest and regular contributions over time.

How Small Investments Make a Big Impact Over Time

This was originally posted on our Voronoi app. Download the app for free on iOS or Android and discover incredible data-driven charts from a variety of trusted sources.

 

 

Time is an investor’s biggest ally, even if they start with just a modest portfolio.

The reason behind this is compounding interest, of course, thanks to its ability to magnify returns as interest earns interest on itself. With a fortune of $159 billion, Warren Buffett largely credits compound interest as a vital ingredient to his success—describing it like a snowball collecting snow as it rolls down a very long hill.

This graphic shows how compound interest can dramatically impact the value of an investor’s portfolio over longer periods of time, based on data from Investor.gov.

Why Compound Interest is a Powerful Force

Below, we show how investing $100 each month, with a 10% annual return starting at the age of 25 can generate outsized returns by simply staying the course:

AgeTotal ContributionsInterestPortfolio Value
25$1,300$10$1,310
30$7,300$2,136$9,436
35$13,300$9,223$22,523
40$19,300$24,299$43,599
45$25,300$52,243$77,543
50$31,300$100,910$132,210
55$37,300$182,952$220,252
60$43,300$318,743$362,043
65$49,300$541,101$590,401
70$55,300$902,872$958,172
75$61,300$1,489,172$1,550,472

Portfolio value is at end of each time period. All time periods are five years except for the first year (Age 25) which includes a $100 initial contribution. Interest is computed annually.

As we can see, the portfolio grows at a relatively slow pace over the first five years.

But as the portfolio continues to grow, the interest earned begins to exceed the contributions in under 15 years. That’s because interest is earned not only on the total contributions but on the accumulated interest itself. So by the age of 40, the total contributions are valued at $19,300 while the interest earned soars to $24,299.

Not only that, the interest earned soars to double the value of the investor’s contributions over the next five years—reaching $52,243 compared to the $25,300 in principal.

By the time the investor is 75, the power of compound interest becomes even more eye-opening. While the investor’s lifetime contributions totaled $61,300, the interest earned ballooned to 25 times that value, reaching $1,489,172.

In this way, it shows that investing consistently over time can benefit investors who stick it through stock market ups and downs.

The Two Key Ingredients to Growing Money

Generally speaking, building wealth involves two key pillars: time and rate of return.

Below, we show how these key factors can impact portfolios based on varying time horizons using a hypothetical example. Importantly, just a small difference in returns can make a huge impact on a portfolio’s end value:

Annual ReturnPortfolio Value
25 Year Investment Horizon
Portfolio Value
75 Year Investment Horizon
5%$57,611$911,868
8%$88,412$4,835,188
12%$161,701$49,611,684

With this in mind, it’s important to take into account investment fees which can erode the value of your investments.

Even the difference of 1% in investment fees adds up over time, especially over the long run. Say an investor paid 1% in fees, and had an after-fee return of 9%. If they had a $100 starting investment, contributed monthly over a 25-year time span, their portfolio would be worth over $102,000 at the end of the period.

By comparison, a 10% return would have made over $119,000. In other words, they lost roughly $17,000 on their investment because of fees.

Another important factor to keep in mind is inflation. In order to preserve the value of your portfolio, its important to choose investments that beat inflation, which has historically averaged around 3.3%.

For perspective, since 1974 the S&P 500 has returned 12.5% on average annually (including reinvested dividends), 10-Year U.S. Treasury bonds have returned 6.6%, while real estate has averaged 5.6%. As we can see, each of these have outperformed inflation over longer horizons, with varying degrees of risk and return.

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Money

Ranked: The World’s Top 10 Billionaires in 2024

With a $205 billion fortune, Elon Musk is currently the world’s richest billionaire.

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Bar chart showing the world's top 10 billionaires as of June 2024.

The World’s Top 10 Billionaires (June 2024)

This was originally posted on our Voronoi app. Download the app for free on iOS or Android and discover incredible data-driven charts from a variety of trusted sources.

Elon Musk has reached a net worth of $205.4 billion in 2024, securing his position as the richest billionaire in the world, ahead of Jeff Bezos at $203.2 billion and Bernard Arnault at $200 billion. Arnault, the billionaire chairman and CEO of the global luxury goods company LVMH, led the ranking at the beginning of the year.

Using data from Forbes’ Real-Time Billionaires List, we provide a snapshot of the top 10 billionaires in the world as of June 11, 2024. It is important to note that the rank changes frequently due to fluctuations in stock prices, market conditions, and significant business transactions.

$1.6T in Combined Wealth

The wealth of the top 10 wealthiest people ($1.6 trillion) is almost equivalent to Mexico’s GDP, the 14th largest economy in the world.

At the top of the list, Elon Musk’s wealth derives primarily from his stake in Tesla, his holdings in SpaceX, and the social media platform X.

RankNameNet Worth (USD in Billions)Source
1Elon Musk$205.40Tesla, SpaceX
3Jeff Bezos$203.20Amazon
2Bernard Arnault & family$200.00LVMH
4Mark Zuckerberg$176.50Facebook
5Larry Ellison$153.70Oracle
6Larry Page$145.10Google
8Sergey Brin$139.00Google
7Warren Buffett$134.00Berkshire Hathaway
9Bill Gates$131.00Microsoft
10Steve Ballmer$126.50Microsoft

Recently, Tesla shareholders voted to approve a pay package worth approximately $50 billion for Musk at the company’s annual shareholder meeting. This decision is being challenged by a Delaware judge, who has described Musk’s award as “unfathomable.”

Meanwhile, Amazon founder Jeff Bezos overtook Bernard Arnault as the second-wealthiest person in June 2024, after LVMH’s shares fell and Amazon’s shares slightly increased.

As a relevant side note, Arnault has also been carefully laying succession plans for LVMH this year, with the 75-year-old recently appointing two more of his sons to the company’s board in April 2024. This leaves just his youngest son without a spot on the board, though he is employed at the company.

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