In early 2003, interest rates on riskless investments fell to 1 percent or less, torpedoing compounding programs below the waterline. Savvy investors still compounded their portfolios at 15 percent or even 20 percent in investments that were almost as riskless.
Now that you've decided to get on the right side of compound interest, it becomes obvious that the percent of return on your savings is a really big deal. There is a huge difference down the road in the results for money compounded at 2 percent as opposed to money compounded at 15 percent or 20 percent.
As this is written, too many people assume they can't get more interest than the pittance of less than 1 percent they can get currently at the bank or in a money market fund, but Safely Prosperous or even Really Rich people never surrender to this assumption because they know they don't have to. In fact, your prosperity depends on getting a decent compound return on your money. If you don't get at least 6 percent, your compounding program is aborted. There are always lots of alternatives for decent yields, sometimes as high as 20 percent with acceptable levels of risk. (“The times they are a-changing” so all of the following examples are for-instances, which may not be good choices by the time you read this, but they are a great place to start looking.)
You can start with 10-year Treasury notes, which in late 2003 are yielding 4.25 percent. Long-term T-bonds ...