Even investing small amounts on a regular basis will compound returns over time.
.
Among many other things, the theoretical physicist and Nobel Prize winner Albert Einstein had a strong grasp of mathematics, particularly around the power of compounding interest returns.
“Compound interest is the eighth wonder of the world,” said Einstein. “He who understands it, earns it. He who doesn't, pays it.”
They were wise words, and they equally apply to any investments that receive income returns and allow additional amounts of money to be added on an ongoing basis.
Leveraging the power of compounding is actually at the heart of investing. Put basically, it’s about growing a smaller amount of money into a bigger amount through a process of continual adding over time.
Typically, the more that’s added, and the more frequently it’s added, the larger the growth over the long term.
Your superannuation at work
An easy way to think about compounding is your superannuation. As your employer makes regular contributions into your account, your savings balance will continue to rise over the long term. That’s due to the money being added in from your employer, but it’ also because of the investment returns that you’re earning on your growing super balance.
Making additional personal contributions on top of your employer’s contributions can have an even greater impact on the size of your retirement savings balance over time.
And the same applies to investments outside of super. An initial starting amount of money is likely to compound over time if regular ongoing investments are made that also harness the growth returns from the underlying investments.
Just like your super contributions, investing outside of super should ideally be aligned to a disciplined, non-emotional, approach that’s not affected by what’s happening on financial markets at any point in time.
Compounding case studies
This may all sound very theoretical, so let’s look at some real examples of compounding growth based on the actual returns from two Vanguard managed index funds over the last 10 years.
We’ve used the returns from the Vanguard Australian Shares Index Fund (which invests in the top 300 companies on the Australian Securities Exchange) and the Vanguard International Shares Index Fund (which invests in around 1,500 companies across 23 developed markets, excluding Australia).
The final results, as at 30 June 2024, are based on an investor having made a $5,000 starting investment into each fund on 1 July, 2014.
The returns compare someone who didn’t make any additional investments over the 10-year period to people who added either $100 per month, $200 per month, or $500 per month.
All of the end returns assume that each investor chose to reinvest all of the income payments that they received on their investments over the 10 years. That is, rather than taking them as cash payments, they used them to purchase additional units in the same fund.
This is a key aspect of compounding, because following a reinvestment strategy means that the number of fund units owned by investors will continue to multiply over time. Any income payments received will be based on a higher number of owned units.
Source: Vanguard. Investment balances exclude acquisition costs, fees or taxes. The example is illustrative only and is based on the factors stated. Past performance is not a reliable indication of future performance.
The numbers in the table illustrate the power of compounding through a combination of long-term growth, reinvesting income, and making regular ongoing investments.
By making no additional investments on top of the initial starting balance of $5,000 on 1 July 2014, an investor in the Vanguard Australian Shares Index Fund would have more than doubled their investment by 30 June 2024 if they had reinvested all their income payments into buying additional fund units.
Yet, by making additional investments at regular monthly intervals and reinvesting all income received, an investment would have compounded even more.
Investing an extra $100 per month, and reinvesting all income, would have lifted an investor’s balance to $29,195.82 by 30 June 2024. Subtract from, that the $12,000 of extra investments made over the period and an investor would still have gained more than $17,000 as a result of compound growth.
Following the same investing strategy, an investor who invested $200 per month would have more than trebled their initial investment amount. Even after subtracting their $24,000 in regular investments an investor would have gained more than $23,000 over the term.
Someone investing $500 per month, and following the same strategy, would have ended up with more than $100,000 over 10 years. That equates to a total gain of 1,962%.
Of course, to get to that level, they would have needed to invest $60,000 over the period. But that’s still a gain of more than $43,000.
Here’s what the numbers look like for the Vanguard International Shares Index Fund.
Source: Vanguard. Investment balances exclude acquisition costs, fees or taxes. The example is illustrative only and is based on the factors stated. Past performance is not a reliable indication of future performance.
While the numbers in the international fund are substantially higher, reflecting the stronger average returns on overseas share markets over the last decade, they similarly illustrate the power of compounding growth.
A $5,000 starting investment in this fund with no additional investments, apart from reinvesting income payments, would have more than trebled. And the final balance numbers at 30 June 2024 would have been much higher, based on the size of additional monthly investments.
Of course, lower or higher amounts of regular investments over time would have produced the same outcome. That is, they would have continued to compound.
You can click here to view a larger version or download the latest Vanguard Index Chart.
Sticking to a plan
Investment markets, particularly equities markets, can be volatile at times. When share markets fall, the value of most share investments also fall. As such, shares tend to be regarded as higher risk than investments that are not subject to rapid daily price movements, and are better suited to investors who have a higher risk/return profile.
Yet, it’s also fair to say that the long-term upward trend on global share markets has regularly produced higher investment returns over identical time periods than lower-risk assets such as bonds and cash.
Just like with your super contributions, investing outside of super should ideally be aligned to a disciplined, non-emotional, approach that’s not affected by what’s happening on financial markets at any point in time.
Making regular investments, and reinvesting income, can really add up over time.
They’re a powerful combination in helping you to focus on achieving your investment goals, ideally through an appropriately diversified portfolio, to give you the best chance of investment success over the long term.
Important Information
Vanguard Investments Australia Ltd (ABN 72 072 881 086 / AFS Licence 227263) (VIA) is the product issuer and operator of Vanguard Personal Investor and Vanguard ETFs and managed funds. Vanguard Super Pty Ltd (ABN 73 643 614 386 / AFS Licence 526270) (the Trustee) is the trustee and product issuer of Vanguard Super (ABN 27 923 449 966).
The Trustee has contracted with VIA to provide some services for Vanguard Super. Any general advice is provided by VIA. The Trustee and VIA are both wholly owned subsidiaries of The Vanguard Group, Inc (collectively, “Vanguard”).
We have not taken your objectives, financial situation or needs into account when preparing this article so it may not be applicable to the particular situation you are considering. You should consider your objectives, financial situation or needs, and the disclosure documents for the product before making any investment decision. Before you make any financial decision regarding the product, you should seek professional advice from a suitably qualified adviser. A copy of the Target Market Determinations (TMD) for Vanguard's financial products can be obtained on our website free of charge, which includes a description of who the financial product is appropriate for. You should refer to the TMD of the product before making any investment decisions. You can access our Investor Directed Portfolio Service (IDPS) Guide, Product Disclosure Statements (PDS), Prospectus and TMD at vanguard.com.au and Vanguard Super SaveSmart and TMD at vanguard.com.au/super or by calling 1300 655 101. Past performance information is given for illustrative purposes only and should not be relied upon as, and is not, an indication of future performance.
An investment in the Vanguard Australian Shares Index Fund and Vanguard International Shares Index Fund is subject to investment and other known and unknown risks, some of which are beyond the control of VIA, including possible delays in repayment and loss of income and principal invested. Please see the risks section of the Product Disclosure Statement (“PDS”) for the Vanguard Australian Shares Index Fund and Vanguard International Shares Index Fund for further details. Neither Vanguard Investments Australia Ltd (ABN 72 072 881 086 AFSL 227263) nor its related entities, directors or officers give any guarantee as to the success of the Vanguard Australian Shares Index Fund and Vanguard International Shares Index Fund, amount or timing of distributions, capital growth or taxation consequences of investing in the Vanguard Australian Shares Index Fund and Vanguard International Shares Index Fund.
This article was prepared in good faith and we accept no liability for any errors or omissions.
General Advice Warning: The information contained on this web site is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser.
Retirement Planning
Retiring on your own terms is not always easy to achieve, however it is evident that those who plan for retirement are more likely to do so. Results also show that obtaining professional help during the pre-retirement years further improves the probability of attaining your retirement objectives.
The earlier you start implementing a plan the better the outcomes.
During one’s working life there is always an income to make ends meet when raising children, paying off a mortgage, etc.
Retirement planning is about the lifestyle you will have after you stop work and receiving employment income. Planning focuses on issues such as how much superannuation is enough, taking a super pension, claiming the Age Pension, making superannuation contributions while receiving a pension from a super fund, estate planning and looking after your family.
Planning properly is becoming even more important now we are expected to live longer. This greater need means that professional help has never been more important.
At Wybenga Financial we will provide the time and expertise needed to help you implement the best pre-retirement plan possible. Contact us today to discuss how we can work together on: (02) 9300 3000 or .
Building Wealth
Investing your hard earned savings can be a complex task. There are many issues such as levels of risk, market timing, asset classes, and your own goals, objectives and preferences that need to be considered. It can often seem a daunting task. At Wybenga Financial we have the expertise to assist you in taking control of your finances and making sure you are generating the wealth you need both now and in the future.
The first step is to create a plan. At Wybenga Financial we take great care in getting to know our clients and their future goals and objectives. We combine our knowledge of your personal goals together with an analysis of your current situation, to create a detailed, personalised plan that will help you meet your objectives. This plan will become your road map which outlines how we are going to meet your goals, whilst aligning all investment decisions to your specific risk tolerance.
After we have created your personal plan, we move to implementation. This is where we action the immediate changes set out in your plan, and put in place reminders for anything that is to occur in the future. As your professional advisers, we can action many steps on your behalf making the implementation of changes as painless for our clients as possible. We aim to make the process smooth and seamless, providing a holistic service that can be executed with ease.
The final and most important phase of the relationship with Wybenga Financial is the ongoing management of your wealth. This ensures you are sticking to your plan and that your portfolio is aligned to your needs and attitude toward risk. An ongoing relationship ensures that we know when your circumstances change and that these can be recognised and reflected in changes to your investment approach.
While we are reviewing your portfolio from the perspective of your personal goals and situation, we also take into account the wider economic landscape and changes to legislation. We continually review and analyse our preferred investments in a structured and objective way. The benefit to our clients is that we are unemotional. This can be significantly beneficial over the long term.
At Wybenga Financial we can provide the time and expertise that will help you invest intelligently and prudently. Contact us today to discuss how we can work together: (02) 9300 3000 or .
Personal Insurance
Life insurance isn’t just a cost, though it often feels like it. You buy peace-of-mind that should a serious issue effect you then the consequences won’t unduly affect your family. Insurance provides you with the ability to manage the financial and emotional impact of some of the more drastic events, whether personally or in your small business.
Insurance can’t replace a loved one but it can help reduce the financial burden by providing the capital to ensure your family has choices.
Many Australians are underinsured and the consequences can be very serious for families should there be a death or serious injury. A yes to any of the following questions means you may have a need for insurance coverage:
Do you have a mortgage?
Do you have school fees?
Do you have any personal loans?
Do you have any credit card debt?
Do you have dependents?
Would your financial position be affected if you were to suffer from an illness or injury?
Do you want to have enough capital to look after your dependents if you were unable to care for them for an extended period of time or perhaps indefinitely?
We understand that it can be difficult determining the type and level of cover you might need, let alone choosing an insurer. We can assist by helping you determine your needs and recommend an insurer that is right for you.
At Wybenga Financial we know how to protect your wealth and will recommend solutions that best suit your needs. Contact us today to discuss how we can work together: (02) 9300 3000 or .
Superannuation
Superannuation is mandatory but taking an early and active interest in your retirement planning is critical to ensuring your benefits are maximised by the time you retire. Many will have a superannuation scheme through employment but increasing numbers are starting their own Self-Managed Super Fund (SMSF).
For many, simply relying on employer contributions may not be enough to provide the lifestyle you desire at retirement. We can assist in building strategies to ensure your retirement goals are met and your required lifestyle is maintained throughout retirement.
It is always best to start saving and planning for your retirement as early as you can.
At Wybenga Financial we know our job is to help you meet your retirement needs and we have the skills and experience to do this for you. Contact us today to discuss how we can work together: (02) 9300 3000 or .
Self Managed Super Funds
Self-Managed Superannuation Funds (SMSFs) offer a good strategy option for many individuals, families and small business owners to build tax effective wealth and to protect assets over time. SMSFs are becoming popular for those who are ready to take control of their own super investments as they give you ultimate control and flexibility to manage your retirement benefits.
It must be noted though, that you will have increased responsibilities as a trustee of the fund. As a SMSF Trustee you need to keep up to date with all required regulations and keep up with the fast paced financial markets.
Wybenga Financial can work with you to understand your personal financial situation and decide whether a SMSF structure is appropriate for you. We will also make sure your assets are invested in the most effective way to maximise your retirement benefits.
Should you wish to consider establishing a SMSF then we can help with all aspects of the process from establishment to managing your compliance obligations.
Wybenga Financial would welcome the opportunity to discuss how we can help maximise your opportunities to grow your wealth through a Self Managed Superannuation Fund (SMSF). Contact us today to discuss how we can work together: (02) 9300 3000 or .
Estate Planning
Your estate is made up of everything you own. This includes your home, property, furniture, car, personal possessions, business, investments, superannuation and bank accounts.
Having an estate plan is extremely important. Having a will is just the first step in your estate plan. It is critical to consider what outcomes you would like for your estate and to ensure a plan is in place to achieve those outcomes, both including and beyond the terms of your will.
Wybenga Financial would welcome the opportunity to discuss how we can help ensure your estate is organised to ensure your plans are implemented as you wish. Contact us today to discuss how we can work together: (02) 9300 3000 or .
Finance
Loans and loan management are central to overall financial management. Obtaining the the most appropriat loans for your needs is crucial and Wybenga Financial can help you with solutions that meet your short and long term needs.
At Wybenga Financial we work with experienced mortgage brokers that can assist you in obtaining the most appropriate loan for your needs and objectives. Whilst this is an external service, we work closely with the brokers to ensure the process is as easy and smooth as possible.
Contact us today to discuss how we can work together: (02) 9300 3000 or .
Property
We have partnerships with many respected property agents and research firms. This enables us to source suitable properties for individuals, couples and families looking to make an investment into property.
At Wybenga Financial we will assist you implement the most appropriate property investment plan possible. Contact us today to discuss how we can work together: (02) 9300 3000 or .
Strategic Planning
Strategic planning is determining how an investor is going to meet their goals and objectives. It is about helping clients define their goals, gathering information and analysing data to make a plan, then implementing the plan and reviewing the results. It is also reviewing and updating goals and objectives as clients move through different phases of life.
At Wybenga Financial, this is the most critical service we provide. For more information please visit our Building Wealth through Strategic Planning page or contact us to discuss how we can work together: (02) 9300 3000 or .
Financial Videos
Secure File Transfer
Secure File Transfer is a facility that allows the safe and secure exchange of confidential files or documents between you and us.
Email is very convenient in our business world, there is no doubting that. However email messages and attachments can be intercepted by third parties, putting your privacy and identity at risk if used to send confidential files or documents. Secure File Transfer eliminates this risk.
Login to Secure File Transfer, or contact us if you require a username and password.
General Calculators
Please enjoy the links to these free tools supplied by MoneySmart – a great resource for general financial information. Please get in touch if you would like to discuss any questions that you may have as a result of using these calculators.
Tess has over 22-years experience in Chartered Accounting Firms and in this time has had a broad range of experience in superannuation, taxation, business services, and financial strategy.
Over the last seven-years, Tess has turned her attention to Financial Planning, earning a Diploma of Financial Planning in 2015 and leading the newly established financial division of the Wybenga Group as a director of Wybenga Financial.
Tess’s mission is to bring the ethics and integrity of her Chartered Accounting background to the area of wealth management.
As a woman in a male dominated field, Tess is active in promoting gender equality in the industry through various programs and mentoring opportunities.
Using her depth of knowledge and experience in tax and accounting Tess is able to demonstrate a level of competence that is unique in the Financial Planning sector.
2001 – Commenced employment with Wybenga & Partners and part-time accountancy studies
2004 – Graduated Masters of Commerce from the University of New South Wales
2005 – Admitted as an Associate Member of the Institute of Chartered Accountants Australia
2007 – Promoted to Manager at Wybenga & Partners
2012 – Appointed as Associate Director
2015 – Awarded a Diploma of Financial Planning
2016 – Appointed as Partner of Wybenga Group and Director of Wybenga Financial
Schedule a Meeting with Tess
Adam Roberts
B.Bus, B.Sc, CA, DipFP
Adam has over 18-years experience in Chartered Accounting Firms and in this time has had a broad range of experience in superannuation, taxation, business services, and financial strategy.
Over the last seven-years, Adam has turned his attention to Financial Planning, earning a Diploma of Financial Planning in 2015 and leading the newly established financial division of the Wybenga Group as a director of Wybenga Financial.
Adam’s mission is to bring the ethics and integrity of his Chartered Accounting background to the area of wealth management.
Combining traditional accounting and financial services has been a welcome move for Adam, allowing him to operate and advise in the financial sector that has been a long time personal passion.
Using his depth of knowledge and experience in tax and accounting Adam is able to demonstrate a level of competence that is unique in the Financial Planning sector.
2005 – Graduated Bachelor of Science from the University of Western Sydney
2005 – Commenced employment with Wybenga & Partners and part-time accountancy studies
2007 – Graduated Bachelor of Business from the University of Western Sydney
2010 – Admitted as an Associate Member of the Institute of Chartered Accountants Australia
2010 – Promoted to Manager at Wybenga & Partners
2012 – Appointed as Associate Director
2015 – Awarded a Diploma of Financial Planning
2016 – Appointed as Partner of Wybenga Group and Director of Wybenga Financial
Schedule a Meeting with Adam
Advisory Cadetships
What is an Advisory Cadetship? An Advisory Cadetship enables you to commence your career whilst attaining the necessary university qualifications by studying part-time.
How does it work? Generally, our cadets complete a relevant business or accounting degree at the University of New South Wales, the University of Technology Sydney, Macquarie University, or the University of Western Sydney.
The Firm provides 3-hours paid study leave per week to attend university. This can either be taken at the one time or broken between days depending on the individual’s requirements. In addition, the Firm provides paid study leave for both mid-semester and end-of-year exams.
We take the work life balance very seriously at Wybenga Financial and our cadets are encouraged to have a fulfilling life outside the office. A typical day will have you arriving at the office at around 8.30am with most days concluding at 5.30pm.
What are the benefits of an Advisory Cadetship with Wybenga Financial? Our cadets benefit from the following:
Career path – on completion of their degree our cadets have significant practical experience which will assist them in advancing their careers
Work helps your studies – by working full-time our cadets are able to apply their practical knowledge in the university subjects
Camaraderie with other cadets – the Firm has a number of cadets at various stages of their career
Mentoring – cadets are paired with a senior staff member who oversees their progress and training both at work and with their studies
Communication and feedback – the Firm has an open door policy which enables all cadets to interact with all members of staff including Directors
Culture – the Firm promotes a friendly social culture with a number of functions throughout the year
Modern environment – including ‘socialising’ areas such as pool table and break out area
Training – ongoing support and technical training. We also provide internal and external training on a monthly basis
Remuneration – working full-time provides a market salary and independence with salaries being reviewed every 6-months
What happens when I complete my degree? The completion of your degree is the first step of what we hope to be a long and successful career with us. The next step is the commencement of a Diploma of Financial Planning followed by completing the requirements to become a Certified Financial Planner (CFP).
There are always progression opportunities for the right cadets and we are dedicated to the long term development of our staff.
Who should apply? Current Year 12 students or first/second year University Students who:
want to commence their career in financial advisory;
are due to commence or are currently completing a part-time business or commerce degree at university with an advisory major;
want to gain valuable hands-on experience while completing their qualifications;
are looking for a friendly working environment;
are team players who display initiative;
have a commitment to self-development;
possess excellent personal presentation and communication skills; and
are motivated and mature minded.
How do I apply for an Advisory Cadetship? To apply for a Cadetship position at Wybenga Financial send us your details. Please also include in your covering letter why you wish to do a cadetship, include relevant qualities you possess, main interests / achievements, and any previous employment.
Interested candidates should initially forward a resume/covering letter of no more than 3-pages. Please provide full details of contact information (telephone or e-mail).
What if I have more questions? For further information about our Cadetship program, please send your enquiry to .
