This is $5,000 invested in the S&P 500 inception to today, never adding a penny but letting it compound. The rocket has liftoff year 42 then takes off.
Second graph, same scenario except this time starting with $1,000 investment and adding $100 per month.
Most people don't understand the simple concept of compound interest.
Albert Einstein once said “Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn't, pays it”.
Most people don't appreciate the leverage applied by using time as an investment tool.
Mid 90's, the proceeds I had put into S&P and similar funds after selling rentals I had bought cheap and renovated years before, suddenly jumped $250k in a year. WTH?? Then $350k the next year. Ok, time for a major realignment of life goals. Instead of working to 65 I retired at 54 with a moderate pension (about equal to SS) that included lifetime medical insurance. I figured that so long as S&P stayed over 900, we would be ok. It has.
We live comfortably but not extravagant, for example newest car is a 2005 that looks and runs like new No debt. Now 20+ years later after putting two kids through university and buying out sis's inherited half of the ranch (apple orchard), our savings balance is 40% higher than retirement day.
The best investment advice I've seen, corroborated by Warren Buffet, is you will do better than the results of 85% of individual investors if you just buy and hold a S&P mutual fund. Clearly you can do better if you actively manage some project like rentals or a business where you are actively involved. The S&P advice is for if you don't want to think about your investments.
Now at an age where IRS expects not much remaining lifetime, the RMD's each year are a lot more taxable income than we have a use for. We've started $10k annual contributions into grandchildrens' 529, college savings plans, S&P funds. Hopefully over 20 years their funds will have appreciated more than the rate of inflation.
Why S&P? My theory, not supported by any research I've seen is: This is the list of America's most powerful corporations, who have the power to dominate or merge lesser businesses, as well as to buy the legislation they need to maintain this dominance. Everybody else is wasting effort trying to keep up with them. Just a theory but I think it explains a lot.
YMMV...
