Originally Posted By: Wolf359
Depend on the market and how long you do it. At one point, I put in 2k in an IRA for 7 years in a row, it grew to 40k. Then there was a correction and I think I lost like 15k but it came back and kept going after that... If you just invest for 3-5 years, you probably won't see anything, but after 10 or 20 or even 30 years, compound interest becomes really amazing.
$2K to $40K is fantastic, good for you! (you took a gamble and won, it does happen) Unfortunately the stats bear out that most of us can't achieve anywhere near that level of return, and that in fact, most investors get a return that is slightly lower than an index fund.
Compound interest is often offset by real world inflation rates. The CPI, Consumer Price Index, a commonly quoted inflation index uses a methodology called "hedonics" in calculation. Meaning that any additional features in a product is subtracted from it's price, to come up with a way to modify the outcome.
A great example is a washing machine. $300 for a specific Whirlpool 4 cubic foot model in 2003. 15 years later, a typical whirlpool is $700. However, that $700 machine has a bunch of new features and functions, including the fact that it uses far less water (hot and cold) Using "hedonics", the "new features" value is calculated at $233, and subtracted from the $700 list price. Leading to a CPI price of $467. SURPRISINGLY close to the often quoted 3% annual inflation rate.
Hint: The actual real-world inflation in this example is 6%. Unless your compound interest account exceeds 6%, you have not made money, you've simply managed to maintain your purchasing power.
Quote Robert A. Heinlein: "A hundred dollars put into a savings account at 6% for 200 years will be worth two million, which, by then, will be worthless"
