Investing is a powerful tool for building wealth, and one of the key drivers of wealth accumulation is compound interest. Compound interest allows you to earn interest not only on your initial investment, but also on the interest generated over time. This compounding effect can lead to exponential growth of your investment portfolio. To illustrate the power of compound interest, let's consider the example of two individuals: John and Mary. Both John and Mary start investing at the age of 25, with an initial investment of $10,000. John decides to invest in a low-risk bond that offers a fixed interest rate of 4% per year, while Mary chooses to invest in a diversified stock portfolio with an average annual return of 8%. After 40 years, John's investment would have grown to approximately $29,000, thanks to the compounding effect of interest. However, Mary's investment would have grown to a staggering $217,000, more than seven times John's investment. This significant difference in growth can be attributed to the higher rate of return offered by stocks compared to bonds. While stocks are generally riskier than bonds, they have historically provided higher returns over the long term. The power of compound interest is amplified when paired with investments that offer higher returns. Compound interest also emphasizes the importance of starting to invest early. The longer your money has to compound, the more it will grow over time. It's never too early to start investing, and even small amounts can make a big difference when compounded over decades. In conclusion, compound interest is a powerful tool for building wealth, and understanding its potential can inspire individuals to start investing or increase their investment contributions. By taking advantage of the power of compounding and choosing investment options that offer higher returns, individuals can take control of their financial future and achieve their long-term goals.