Investors leave 80% on the table, according to Vanguard founder Jack Bogle.
We all know that the key to building long term wealth is to tap into the power of compounding returns. It’s a concept that’s universally accepted by savers, investors, finance professors, and math geeks. But for most of us it still requires a leap of faith, because the math can be a little tricky.
Anyone willing to devote 5 minutes to this topic will understand just how powerful compounding is. Why is this important? Because the power of compounding is a double-edged sword. Compounding growth (especially in a tax-deferred account like an IRA or 401K) will turbo-charge your wealth, compounding costs are a real drag. It’s important to understand how both of these forces work, and how they impact your portfolio.
If you are an experienced investor, or someone who is good at math, you might think you don’t need to go through this exercise. But when it comes to the compounding cost part, you might be surprised to learn just how much of a drag it really is.
Read the full article at Seeking Alpha.