Please don’t underestimate the power of compounding
the generous returns earned by our businesses. Over the
past century, our corporations have earned a return on their
capital of 9.5 percent per year. Compounded at that rate
over a decade, each $1 initially invested grows to $2.48;
over two decades, $6.14; over three decades, $15.22; over
four decades, $37.72, and over five decades, $93.48.* The
magic of compounding is little short of a miracle. Simply
put, thanks to the growth, productivity, resourcefulness,
and innovation of our corporations, capitalism creates
* These accumulations are measured in nominal dollars, with no adjustment
for the long-term decline in their buying power, averaging about 3 percent
a year since the twentieth century began. If we use real (inflation-adjusted)
dollars, the return drops from 9.5 percent to 6.5 percent. As a result, the
accumulations of an initial investment of $1 would be $1.88, $3.52, $6.61,
$12.42, and $23.31 for the respective periods.

The Little Book of Common Sense Investing by John C BOGLE sayfa 3

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