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Investing 3: Smooth Spending & The 401K
Planet Money Summer School
The Power of Compounding
compounding is a really important concept, and i got to say, it's a little tricky to explain. It's not just the original amount of money that you invest in stocks or in bonds, or whatever, that generates returns each year. Those early returns then get re invested and generate their own returns. And so the pile of money you have to invest just keeps getting bigger and bigger.
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