Albert Einstein did not wake up one day and decide to figure out his groundbreaking theory of relativity. He did not get out of bed, grab a cup of coffee and then brilliantly lay the foundation for modern physics.

No, he spent years prior to the discovery obsessively thinking about the underlying concepts of Newtonian and particle mechanics in conjunction with electromagnetic and gravitational fields. He put time and energy into his work, day in and day out, to build his ever-growing knowledge base of physics to the point where his theory manifested.

In other words, his effort exponentially compounded to reach an amazing conclusion.  

Einstein's skill compounding is similar to the financial concept of compound interest, which by the way Einstein famously called "the greatest force in the universe" and described it as the “the eighth wonder of the world." We describe it as the interest on the interest on the capital we invest.

As investors, we all have seen the magic of compound interest. For example, a $100 investment that earns a 10% average annual return for 25 years will magically turn into $1,083 at the end of the 25 years. We all want to experience that magic in our own investment portfolios. But the key is putting in the time — having a long-term investment time horizon — and not playing around with the capital that is invested when markets become volatile and go down.

By putting in the time, we as investors may not come up with any groundbreaking theories in physics, but we may obtain our wealth planning goals through the magic of compounding.

 

This material is for informational purposes only and is not intended to serve as a substitute for personalized investment advice or as a recommendation or solicitation of any particular security, strategy or investment product.  The opinions expressed do not necessarily reflect those of author and are subject to change without notice.  Diversification cannot assure profit or guarantee against loss. There is no guarantee that any investment will achieve its objectives, generate positive returns, or avoid losses. Sequoia Financial Advisors, LLC makes no representations or warranties with respect to the accuracy, reliability, or utility of information obtained from third-parties. Certain assumptions may have been made by these sources in compiling such information, and changes to assumptions may have material impact on the information presented in these materials.  Investment advisory services offered through Sequoia Financial Advisors, LLC, an SEC Registered Investment Advisor. Registration as an investment adviser does not imply a certain level of skill or training.