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Stompy · 07-05-2005, 07:38 AM

I have this Motley Fool book on strategic investing and whatnot... and all throughout the book they keep talkin about picking a portfolio that will outperform the S&P 500.

Now, they frequently mention, "$10,000 invested over 20 years becomes $80,623 at the 11% average of the S&P 500"

I have a fake portfolio I set up 2 years ago that has had consistent returns of over 25% (right now, it's 27.46%), yet the value... is exactly 27.46% of my initial "investment".

Where is the compounding effect I'm hearing about?

Something doesn't make sense here... let's say this 25% return remains consistent over 10 years. Based off the initial $1655, I will have $15,413.

There's only 6 stocks in this portfolio with 10 shares each, so that means each stock, on average, would have to be $256 per share. After 20 years when it should be worth $143,548, then each share should be $2392 per share.

Um... yeah, something isn't quite right with that...

So yes... where and how is this compounding effect taking place?

07-05-2005, 07:38 AM	#1 (permalink)
Stompy Banned from being Banned Location: Donkey	Compounding interest with stocks? I have this Motley Fool book on strategic investing and whatnot... and all throughout the book they keep talkin about picking a portfolio that will outperform the S&P 500. Now, they frequently mention, "$10,000 invested over 20 years becomes $80,623 at the 11% average of the S&P 500" I have a fake portfolio I set up 2 years ago that has had consistent returns of over 25% (right now, it's 27.46%), yet the value... is exactly 27.46% of my initial "investment". Where is the compounding effect I'm hearing about? Something doesn't make sense here... let's say this 25% return remains consistent over 10 years. Based off the initial $1655, I will have $15,413. There's only 6 stocks in this portfolio with 10 shares each, so that means each stock, on average, would have to be $256 per share. After 20 years when it should be worth $143,548, then each share should be $2392 per share. Um... yeah, something isn't quite right with that... So yes... where and how is this compounding effect taking place? __________________ I love lamp.