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Buffett's Investment Secret: Compounding Contribute $9 a day, $250 a month. Accumulate $55,000, $200,000, $1,000,000 over time. Use a special IRS account for Tax-FREE income. Use only low-cost high-return mutual funds. Manage the account only once a year. Warren Buffett's Investing Secret is compounding high earnings over time. It is what turns your $9 a day into $1,000,000 in time. Compounding is money earning money on its earnings when it is invested. Invest your money in businesses sharing profits with you and over time you can reach $1,000,000. A special account makes it tax-FREE. Tax-FREE is like a $300,000 bonus. When we invest in successful businesses, we can earn 10% to 12% a year. After 10 years, we can have $55,000 because the businesses paid dividends and we reinvested them. After 20 years, we could have $200,000 and after 33 years, perhaps $1,000,000. Over time, stocks are safer than bank CDs because we earn more than inflation subtracts. We have more buying power. Compounding works best when we put our money to work in successful businesses paying us dividends and stock splits. When we use a low-cost tax-FREE account, we avoid fees and taxes so we keep more of our money to compound. The table below gives us some idea of how fast our investment can grow if we invest it in businesses like the ones we use every day. Compounding works best if you do NOT have to pay tax on the earnings and broker fees every year. That way ALL of your earnings would be reinvested for the next period. This illustrates what happens to tax-FREE compounding over time. I will show how to set this up in only one hour. Use 10 low-cost mutual funds for life. Set it and forget it.
