Was Einstein really so clever…

One of the most heavily quoted people when it comes to investing money is Albert Einstein who said that the miracle of compounding is the eighth wonder of the world.

Seems a very sensible and level headed way to look at things. But is it valid in all situations?

For many online investors I’d suggest the answer would be ‘it depends’. For those of us who have been swimming in the shark infested waters of online investing for any length of time it soon becomes clear that the allure of compounding at every opportunity can be fraught with danger and losses.

The temptation to rapidly grow what starts out as possibly a fairly small sum of money can be overwhelming and push good sense to one side. So, what should we do?

Is it always necessary to retrieve your initial investment as quickly as possible and then only have future earnings at risk?

To me the answer is not always the same. Whenever I invest I do so on the basis that the money I’m putting in is expendable and doesn’t stop me living my life or place me in any financial danger. So for me you’d think that I’d always compound earnings and only withdraw when I had a reasonable amount available to me.

Easy to say I know but in reality even I have a tolerance threshold where common sense tells me that I should recover the seed money first.

Now the question becomes what is that level of tolerance? I’m sure you all have different figures in mind as you read this post. Some people may say no sum is acceptable whilst others may be happy to invest many thousands. Of course it all comes down to personal preferences and circumstances.

As I write this post my first thought is 1,000 whatevers. And yet while I think about this a little I realise that I’m sometimes a little too carefree when joining a program so perhaps a more conservative figure would be better. Then again a 1,000 whatevers is a nice round number isn’t it? Any thoughts?

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