The power of compounding is an important concept that investors need to understand. Investing consistently and starting earlier in your life (i.e., age 25) can result in hundreds of thousands more dollars in your investment account than if you were to start 10 years later.
While quite a few personal finance pundits have suggested that a stock investor can expect a 12% annual return, when you incorporate the impact of volatility and inflation, 7% is a more accurate historical estimate for an aggressive investor (someone primarily invested in stocks), and 5% would be more appropriate for someone invested in a balanced portfolio of stocks and bonds.
