The $900M Investor’s Secret: Why Compounding Should Be Taught in High Schools

Investor who manages $900 million in assets says there’s one investing hack everyone should know: ‘I wish they would teach it more in high school’

A seasoned investor overseeing $900 million in assets recently emphasized the importance of a particular investing strategy, which he described as a fundamental concept that should be introduced earlier in education. This strategy, often referred to as compounding, is one of the most powerful tools in long-term wealth creation. The investor noted that many fail to grasp the full potential of compounding due to a lack of early financial education, and he expressed a desire for it to be included more prominently in high school curricula.

Compounding, or compound interest, works by generating returns not only on the initial principal but also on the accumulated interest over time. For example, an investment that earns 5% annually will grow exponentially over decades, as the interest itself begins to earn interest. The investor highlighted that the earlier individuals begin investing and the more consistently they contribute, the more pronounced the effects of compounding become.

This principle is supported by basic mathematical calculations, where even modest monthly contributions can result in substantial portfolio growth over time. The investor recommended that individuals, especially young investors, focus on long-term horizons and avoid the temptation to frequently trade or time the market, which can disrupt the compounding process.

The investor’s comments align with broader discussions around financial literacy and education reform. Many experts agree that early exposure to personal finance concepts, including compounding, can lead to better financial decisions later in life. Despite the increasing availability of online investment platforms and tools, the fundamentals of investing remain unchanged, with compounding serving as a cornerstone for sustainable wealth growth.

The emphasis on compounding as a core investment strategy is echoed in various financial planning discussions and investor education materials. As more individuals seek to build intergenerational wealth and navigate the complexities of global markets, understanding and applying this foundational concept is increasingly vital.