Small differences in the return on an investment can make a big difference over time. The difference between 9% and 10% doesn’t sound like much, but let’s take a look at what kind of difference it can make.
Suppose there were two people who at 20 years old had $100,000 each. One person is earning 9%, the other 10%.
At age 40, the person earning 10% has accumulated $112,309 more than the person earning 9%.
At age 60, the person earning 10% has accumulated $1,384,984 more than the person earning 9%. That one percentage point difference in return results in a portfolio balance that is 44% greater after 40 years!
As you can see, over the course of a lifetime, a small difference in return results in a huge difference in the amount of earnings.
Always seek to maximize the risk-adjusted return of your investments through smart asset allocation and minimization of investing costs.