A compounding investment is one where the interest you receive is re-invested into the principal investment. So for example, if you invest a thousand dollars at 5 percent return, at the end of the first year you will still have your one thousand dollar principal, plus $50 dollars interest earned, for a total investment of $1050.

By rolling each of your interest income amounts back into your original investment, in other words allowing it to accumulate or compound, you produce a very powerful effect over time.

The average working life is forty years. If a young person 20 years of age decides to invest just one hundred dollars each month until age 60, they would invest a total of $48,000 (($100 x 12mths) x 40yrs).

However… if they had it invested at 10% return and allowed their interest income to accumulate within their investment fund, they would end up with a nest-egg over ten times the size of their total investment amount and would reap a payout of over $584,000 by the time they reach age 60!

The period of time that your money has to accumulate, and the interest rate at which it is earning income, are critical factors in the compounding process. Further, if you employ leverage by investing in real estate, you can really magnify your returns over time.

Typically, one can purchase residential real estate for a 20% down payment. If you follow Hans Jakobi's teachings, you can even do it for no money down. But assuming 20% down, if you invest forty thousand dollars to purchase a $200K home, when that property appreciates 5% it will be worth $210K. That $10K is a 25% return on your forty thousand dollars invested. Once the property is worth $300K and it increases another 5%, it will be worth $315K. You will then have made a 37.5% return that year on your original forty thousand dollars invested.

It is definitely worthwhile getting educated about financial matters because if you apply good knowledge to your investing, you can dramatically alter your lifestyle and retire years early. One excellent source of financial education is Success University. Their curriculum includes dedicated sections for both finance and real estate from world experts such as Jay Abraham, Carol Tuttle, and Greg Reid amongst many others. You can check out Success University by accessing their $2 fourteen Day Trial membership via the peel away ads graphic in the top right hand corner of the page I linked to in the above paragraph.