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The Power of Long-Term Compounding with Minimal Taxes
Continuous compounding over 25 years with minimal taxes can significantly increase your investment returns. If you allow compounding to happen without tax intervention, a dollar can grow to $24.9 with a 15% compounding rate. However, if you pay taxes every five years on your investment, the dollar grows to only $16.8, resulting in a 50% decrease in the final amount.