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Stompy · 07-07-2005, 01:15 PM

No, I know how the compounding works.

My question is... where is the money from this compounding coming from if your investments are statically linked to stocks?

Like the example I used in my first post... the portfolio actually had a 45% return the first year, and roughly 25% the second year off the initial $1655 investment.

So you have:

$1655 * 1.45 = $2399 (first year)
$2399 * 1.25 = $2999 (second year)

At least, that's what's being explained to me, yet... there's only $2109 in there now. There's been nothing compounded. Why not?

The portfolio currently has the 27% gain, but if stocks go down, others go up and it REMAINS at 27%, then... it doesn't matter if it's 10 years from now, it will still only be 27% of 1655.

See what I'm saying? From what I'm seeing, after year 1, the portfolio had a return of 45%. Then it DROPPED back down to 25%.

In the example I used in one of my above posts... let's say there was always this 25% gain on the portfolio. After 10 years I'd have $15,413. If I only have 6 different companies @ 10 shares each... then each share on average would have to be around $256.

Of course.. that's an outrageous price. So I'm missing something regarding the compounding.

07-07-2005, 01:15 PM	#5 (permalink)
Stompy Banned from being Banned Location: Donkey	No, I know how the compounding works. My question is... where is the money from this compounding coming from if your investments are statically linked to stocks? Like the example I used in my first post... the portfolio actually had a 45% return the first year, and roughly 25% the second year off the initial $1655 investment. So you have: $1655 * 1.45 = $2399 (first year) $2399 * 1.25 = $2999 (second year) At least, that's what's being explained to me, yet... there's only $2109 in there now. There's been nothing compounded. Why not? The portfolio currently has the 27% gain, but if stocks go down, others go up and it REMAINS at 27%, then... it doesn't matter if it's 10 years from now, it will still only be 27% of 1655. See what I'm saying? From what I'm seeing, after year 1, the portfolio had a return of 45%. Then it DROPPED back down to 25%. In the example I used in one of my above posts... let's say there was always this 25% gain on the portfolio. After 10 years I'd have $15,413. If I only have 6 different companies @ 10 shares each... then each share on average would have to be around $256. Of course.. that's an outrageous price. So I'm missing something regarding the compounding. __________________ I love lamp. Last edited by Stompy; 07-07-2005 at 01:23 PM..