The Billion-Dollar Lesson From a Janitor: What History Teaches Us About Compounding

The Power of Compounding 📈

Hey everyone! Schuyler Cristopher here, your friendly neighborhood finance teacher. Let’s talk about a powerful force that is as simple as it is overlooked – compounding.

Compounding is like a snowball rolling down a hill. It starts small but picks up speed as it gathers more snow. The bigger the snowball, the faster it rolls, and the more snow it gathers.

Today, we’re going to learn why compounding is the most powerful force in investing, and how it helped a humble janitor, Ronald Read, become a multi-millionaire.

The Janitor Who Became a Philanthropist 🧑‍🔧

Let's meet Ronald. He was born in rural Vermont, the first person in his family to graduate high school. He spent his life working at a gas station and sweeping floors at JCPenney. He lived in a two-bedroom house and his main hobby was chopping firewood. 🤔

But here’s the twist. Ronald died at age 92, leaving $2 million to his stepkids and more than $6 million to his local hospital and library! 😲

What’s the secret? No lottery win. No inheritance. Ronald Read saved his money and invested it in blue-chip stocks. Then, he waited. For decades! Those tiny savings compounded into more than $8 million.

Compounding is Not A One-Day Deal ⏳

Let's understand the power of compounding.

Imagine you had $24 and invested it at an 8% annual return. What would that be worth in 170 years? It would be worth over $28 trillion! That’s more than the value of Manhattan Island. 🤯

Another example: Say you invest $100 at 10% annually. In 7 years, you'll have $200! The next 7 years, it doubles again to $400! And so on...

This is the magic of compounding. Small amounts, invested regularly, can grow into something huge over time!

The Power of Time 🕰️

Warren Buffett, one of the world’s most successful investors, built a fortune of over $84 billion. But most of his wealth was accumulated after his 50th birthday! Warren Buffett is a phenomenal investor, but the real key to his success is that he’s been a phenomenal investor for almost 75 years. Had he started investing in his 30s and retired in his 60s, few people would have ever heard of him.

The power of compounding is not just about the return you earn, but the time you give it to work its magic.

Time is the Most Important Factor 🕐

This is why it’s crucial to start investing early! It might seem intimidating, especially in a world where financial news can be scary.

But the best thing you can do for your financial future is to get started—even with a small amount of money. Just as Ronald Read showed us, those little amounts, compounded over decades, can transform your life.

The Psychology of Money 🧠

You might be thinking, “This is all great, but I don’t have a lot of money right now.” And you’d be right! It can be tough to start investing when you’re just getting started, and there are a lot of excuses we tell ourselves:

• “I’m too young.”
• “I don’t have enough money to start.”
• “I don’t know how to pick stocks.”
• “It’s too risky. I could lose all my money.”

But the truth is that everyone can invest. You don’t need to be an expert. You don’t need a lot of money. You just need to take action and be patient.

Remember, compounding works best when you’re investing for the long term. You have to be willing to stick with your plan and ride out market downturns. It’s not about making quick money. It’s about building a solid foundation for your financial future.

Key Takeaways

Here are a few things to remember about compounding:

• It’s about time. The longer you let your money grow, the more powerful it becomes.
• It’s not just about big returns. Even modest returns, compounded over time, can create wealth.
• It’s a long-term game. Don’t try to time the market or get rich quick.
• It’s all about taking action. Don’t let fear or excuses stop you from getting started.

Ronald Read’s story is a powerful reminder that anyone can become wealthy with a little bit of discipline and a long-term vision. Don’t be afraid to take the first step! Let's awaken your own financial genius. 🎉

I want you to walk away from this with three things:

1. Learn about compounding. It’s one of the most powerful concepts in finance. Everyone should understand it.
2. Don’t be afraid to start investing. It’s not as scary as you think.
3. Take action! Don’t wait for the “perfect time” to get started. The sooner you start, the better!

I hope you enjoyed this blog, and make sure to share it with your friends! 🙏