How does a 19 year old have $1,500 in 1972?

[baseballart]

Originally Posted by prewarsports

That is the power of compounding interest. Nothing makes 660% per year, but you start compounding interest on a decent stock portfolio over the long haul and that $1500 for 40 years makes more than that Wagner.

Dow Jones Industrial was about 1000 in 1972, 12880 at end of December 31, 2010. Not quite the same return as a Wagner. Different asset mixes would no doubt produce much better historical results, but that is an average indication of the performance of the US market since 1972.

http://stockcharts.com/freecharts/hi.../djia1900.html

If a stock portfolio has an average dividend yield in excess of the prevailing interest rates, there is considerable risk to the capital. As well, tax must be paid on dividends and interest, cutting into the compounding effect. As well, as 2008 shows, stocks have risk to capital loss as well as capital appreciation.

Interest on $1500 at 10% after-tax (an impossible historical rate of return, without great risk to capital) compounded annually provides a value after 40 years of $67,888. Compounded daily, it amounts to $81,852.

http://www.moneychimp.com/calculator...calculator.htm