If you put $1000 into Google stock 10 years ago, here’s how much you’d have now.
If you invested $1000 in Google 10 years ago, here’s how much you’d have now
It may be tough to make sense of the news that Google’s stock was down today.
But when investing in a company like Google 10 years ago, a smart move would have been to use the power of compound interest to your advantage.
Using as many options as you can find, invest in a number of times — as much as you can afford.
Let’s say you invested $1000 in Google stock 10 years ago. Would you have lost money?
The answer is yes — but only because of a dramatic decline in Google’s stock over that time period.
By using the power of compound interest, you would have realized a $550 profit.
How to double your investment in 10 years
Of course, compound interest doesn’t work in the same way every year. Over a number of years, your returns would have significantly diminished.
In my example, here’s what happened when I updated my inflation-adjusted portfolio by how much the value of Google’s stock had increased or decreased over a period of 10 years.
First, I had 9 years of data showing the 10-year total return of Google stock. Then, I calculated how much of Google’s total return over that time period was due to the stock price appreciation, and how much was a result of the company’s earnings growth.
I then divided each percentage by the original $1000 invested and then multiplied the sum by 10.
Using these numbers, I then calculated the incremental return over a decade of investing in Google stock, which I called the “consideration period.”
To return this consideration period amount to your original $1000 investment, you would have to earn the increase in Google’s stock value plus compound interest for another 10 years.
In simple terms, over 10 years, you would need to earn a return of 5 percent every year.