CHAPTER 3Core Investing Concepts: Inflation, Compounding, and the Rule of 72
Compound interest is magical!
#CLEVERGIRLSKNOW
In this chapter we get into the details of some core investing concepts so you can get a clear view of the big picture of how investing allows your money to grow. Once you understand these concepts, you can leverage them to make your investments really work for you.
A lot of times, when investing is discussed generally, the conversation is typically based on losses or gains. How much an investment grew over what time period or how much it lost. These conversations can make it seem like investing is a game of chance based on a random roll of the dice or on some strange mystical algorithm that no one can figure out except its creator.
If I had a dollar for every time I've heard someone celebrate how much money they've made on an investment over time or complain about how they got burned on an investment gone wrong, I'd be a gazillionaire. I hear these conversations all the time. And when it comes to new investors, the resulting trend I notice is usually one of two things.
The “I made so much money on X investment!” discussions can make a new investor excited to dive into investing. Sometimes too excited. In this scenario, they may throw all caution to the wind and choose investments out of excitement and hype without taking time to properly understand and evaluate them.
On the flipside, the “I lost so much money on X investment!” discussions can be totally ...
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