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Is compounding interest on investments a myth?
So my Question is this, in reality is investment in equities like the   stock market even remotely resemble the type of growth one would   expect if investing the same money in an account with compounding   interest? Generally no as there is a great deal of volatility when it comes to investing in stocks that isn't well represented by simply taking the compounded annual growth rate and assuming things always went up and never went down. This is adding in the swings that the market will take that at times may be a bit of a rude surprise to some people. Are all these prognosticators vastly underestimating how much savers   need to be socking away by overstating what is realistic in terms of   growth in investment markets? Possibly but not probably. Until we know definitively what the returns are from various asset classes, I'm not sure I'd want to claim that people need to save a ton more. I'll agree that the model misses how wide the swings are, not necessarily that the averages are too low or overstated.