Compounding

Give yourself enough time

Getting in shape to run 26 miles takes time, but you can feel the results as you approach your goal. In investing, time is your greatest asset because investments don’t increase in value overnight. Consider this example, investing $90 a month in a mutual fund—that’s just $3 a day—could generate over $16,000 in ten years (assuming a hypothetical average annual return of 8%). Surprised? If an investor does not make withdrawals, they can earn money on both principal and interest. This process is known as compounding, and it is the key to long-term investment growth.

Even small amounts invested regularly can make a big difference over the long term. By establishing an automatic investment program a shareholder can put saving and investing goals on autopilot by deducting as little as $50 a month from a bank account or paycheck for investment in an Ariel Investments account. Because it’s automatic, our shareholders have found they are less likely to give up when times get tough.


Need more convincing?

Investing just $50 a month consistently over 25 years grows to $47,868 (assuming an average annual return of 8%). As an investor’s financial situation improves, they can increase their contribution and the story gets even better. Take a look at the chart below. By investing $100 a month, an investor could have $95,737 over the same 25 year timeframe! This is the power of compounding and something you cannot afford to miss.

Projected Account Total in 25 Years

Note: A program of regular investing does not assure a profit or protect against loss in a declining market. The examples show the benefits of an automatic investment program and assume regular monthly investments over a specified period at a hypothetical annual return rate. Examples are illustrative only and are not indicative of any specific return an investor may receive from a particular investment.

 

Past performance does not guarantee future results. © Ariel Investments, LLC. The mutual funds offered by Ariel Investment Trust are distributed by Ariel Distributors, LLC. Use of this website is subject to our Terms & Conditions of use. Each of the investment products, mutual funds or services referred to in this site may be offered only to persons in the United States. This web site should not be considered a solicitation or offering of any investment products, funds or services to investors outside the United States. Original illustrations © Omar Rayyan 2007.