In honor of Worldwide Invest Better Day, we at The Motley Fool are recapping our "13 Steps to Investing Foolishly" — steps you can follow to become a better, more Foolish investor.
In the following video, analyst Austin Smith explains the importance of Step No. 1: Understanding the one calculation that will change your life. The calculation is x (1 + i)^n, and it will show you how much your money will grow to, given your investment horizon and the interest rate you expect to receive.
The power of compounding interest is never one to be underestimated. As Austin points out, investors who patiently invest in stocks for the long run are generally handsomely rewarded. While savings accounts and money market funds usually fail to even keep pace with inflation, with enough patience, stocks can be a powerful wealth multiplier. Even after going through the worst recession in recent memory, the Dow Jones Industrial Average has still returned more than 70% over the past 10 years and is now on track to eclipse the high-water mark it set back in 2007.
Click the big green button to join the thousands of people celebrating Worldwide Invest Better Day on Sept. 25!
The article 13 Steps to Investing Foolishly, Step 1: The 1 Calculation That Will Change Your Life originally appeared on Fool.com.
Austin Smith and The Motley Fool have no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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