I am sure that all of you must have heard about the famous Manhattan Island in New York City. It’s one of the financial and commercial centers of America which also includes the iconic Empire State Building as well as Times Square.
But do you really know how much did Indians of Manhattan get from immigrants by selling it in 1626? Just$24.
Yes, Indians of Manhattan sold the whole island for $24. Today, the book value of the whole land is worth $30-Billion (as per reports). And if you believe the market reports, the value of the land should be double the book-value i.e. $60-Billion. The value appreciated by whopping 216666666567% in these many years. Big deal, right?
Hold on. Let me show you the other side of the story.
What if the Indians of Manhattan had invested those $24 in 1626 at the rate of 8%? Well, the amount of $24, compounded annually at the rate of 8% in a time period of 1626-2017, would have been worth $281-Trillion. Money would have compounded for whopping 391 years.
Had they invested it at 7%, the final amount would have been $7.4-Trillion. And that’s the difference a minute change in percentage makes. A difference of 1% CAGR would have reduced the final amount by a huge margin of $273.6-Trillion.
Lessons to be learned from this story:
- Always take a long-term perspective while investing your money.
- Let your money compound for a long period of time. It’s when it works best.
* * *
Follow RichifyMeClub on Twitter
* * *