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The Power of Compound Interest

Warren Buffett is widely known for saying the single most powerful factor behind his investment success is compound interest. That’s usually his quickest response when asked; “What’s made him successful?” He’s been focused on compound interest investments (purchasing large amounts of dividend paying stocks and always reinvesting dividends) for over six decades, and it’s made him a billionaire.

The compound interest investment strategy is something every investor can copy with the right opportunity, personal portfolio setup, and time. The power of compound interest can be best understood when looking at the chart summarizing returns for how a $100K investment continues to grow over time and earn more income every time the principle is compounded on a monthly compounded basis. With the power of time and compound interest the $100K investment can earn 10%+ return in ten years when it’s earning 6% compounded interest.

As an investor it’s critical to have a balanced portfolio comprised of short-term, long-term, and ideally some compound interest-earning investments to meet the individual’s goals. We launched the Real Estate Debt Fund in 2020 because there was a need for compound interest opportunities and an investment that has a liquidity option to get your money back if you need to quickly. If you are interested in learning more, check out the current offerings section on passiveinvesting.com or contact investorrelations@passiveinvesting.com.