QOTD: When Your Interest Earns Its Own Interest

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Let’s say you decide to invest $100 and you have the ability to get a 10% annual rate of return. At the end of 1 year you will have your $100 in principal and an additional $10 in interest. Nothing special. However, as you continue to compound your money, the process starts to behave fractally. How? In year 2, when your $100 once again gives you $10 in interest, now your $10 in interest from year 1 will throw off $1 in interest as well. The $10 has begun to behave like the $100 did in year 1. You can imagine the relationship between the $10 and its $1 in interest like the $100 and its $10 in interest. And this process continues in year 3 when the $1 in interest from year 2 throws off $0.10 in interest, and so on.

The beauty of compound interest is that it continues to behave fractally with each piece of interest eventually earning its own interest.

Wanna Get Rich? Think Fractally (Of Dollars And Data)

I worship at the altar of compounding. You should too. I don’t just mean as it pertains to money, but as it pertains to all things – relationships, practicing an instrument, exercise and athletics, reading and building knowledge, etc.

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