Rich Man, Poor Man

Richard Russell is one of the most famous investment analysts working today, having penned the Dow Theory Letters for four decades. By his own admission, the most popular piece he ever wrote is titled "Rich Man, Poor Man," to illustrate the power of compound interest over time (sometimes referred to as "the eighth wonder of the world.) His entire piece can be read here, but the following table (reproduced without RR's permission) illustrates his point. While compound interest works at any age, anyone in their twenties, or with young children, should read his piece and meditate on the table below and do what it takes for seven years to create a nest egg. I wish I had seen this table, and had someone to "force" me to do this, between the ages of 19 and 25. (The table assumes an annual interest rate of 10 percent, the approximate average increase of the stock market over time. Obtaining such a rate today is rare, of course, but the principle of compound interest still holds regardless of the average ROR [rate of return]).