Compounding

The King's Chessboard

There is an old tale of an emperor and the inventor of chess. The inventor, after impressing the emperor with the game, was granted a reward of his choosing by the emperor. The inventor’s request was simple: a single grain of rice on the first square of the board, two on the next, four on the next, eight on the next, and so on until every square had its rice. The emperor granted the inventors modest request and sent the treasurer off to gather the rice. After a week, the treasurer returned to the emperor with bad news. He didn’t have enough rice to pay the inventor. Not only were the emperor’s and the kingdom’s reserves insufficient, but there wasn’t enough rice in the world to fulfill the request.

The total amount needed to fulfill the request would have been over 18 Quintillion grains - amounting to more than the entire wealth of the world.

This inventor recognized the power of compounding and how small numbers can become quite large. Investors like Warren Buffett and Charlie Munger made the power of compounding a reality, turning their savings from youth into one of the largest corporations in the world.

When we consider compounding in the investment world, it’s important to focus on the long-term. Allowing investments to grow over time has been the key to many individuals’ financial success. It’s never too early to start planning for your future and start letting compounding work for you. Come by the Wealth Management & Trust Department and speak with us about how we can work with you on investing toward your financial goals.