Power of Compounding
When it comes to saving and investing, time really is on your side. Long-term investing can provide returns that significantly outpace inflation when you put the power of compounding interest to work for you. Each year, your investments may earn interest, dividends, or capital gains. Reinvesting those earnings helps generate additional earnings. Take these additional earnings, reinvest them, and they too start producing more income. The compounding cycle goes on and on, with the real payoff coming when you approach 20-plus years of reinvesting.

Consider this:
If an investment returns 8% per year (net of all fees and expenses) and its earnings are reinvested:
  • After one year, your total return will be 8%.
  • After five years, your cumulative total return will be 47%.
  • After 10 years, your cumulative total return will be 116%
  • Or, if you invested $100 every month for 30 years and reinvested all your earnings, with an 8% average annual return, in 30 years your total investment would be worth approximately $141,761 before taxes. Over 30 years you only invested $36,000. Compounding produced the rest, over $105,000 before taxes!
That is the power of compounding!

The name of the game is to invest early and often. For example, the chart below shows how much you would save for retirement if you started investing $2,000 annually at age 29 for only 10 years. It then compares it to how much you would have if you started investing the same amount each year from age 39 until retirement.

Starting Age

Annual Investment

Years Contributing

Annual Growth

Total Investment

Value At Age 65

29

$2,000

10

8%

$20,000

$231,000

39

$2,000

26

8%

$52,000

$173,000


The bottom line? Start saving as soon as you can and consider reinvesting your earnings to take full advantage of the power of compounding.

Figures shown are for illustrative purposes only and do not represent past or future performance of any of the Funds. Investment in the Funds involve investment risks including the possible loss of the principal amount invested.

Automatic Investment Plans and dollar cost averaging do not ensure a profit or protect against loss in declining markets. The hypothetical examples shown assume a fixed rate of return on continuing investments of 8% (net of all fees and expenses) compounded annually except where otherwise noted, without considering any costs of investing or taxes on investment income. The examples also assume there are no fluctuations in principal value other than from additional investments and income. Actual results will vary. The examples do not depict or predict the return on any specific investment and are not intended to constitute investment advice. We strongly encourage you to work with your financial professional to create an investment plan that is most appropriate for you.

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Shares of the Pacific Advisors Funds (the “Funds”) are not deposits or obligations of any bank, are not guaranteed by any bank, are not insured by the FDIC or any other agency, and involve investment risks including the possible loss of the principal amount invested. For more information on the Funds, including objectives, risks, charges and expenses, please download the prospectus or call (800) 989-6693 to request a copy. Please read the prospectus carefully and consider the investment objectives, risks, charges, and expenses before investing. Pacific Advisors Funds are distributed by Pacific Global Fund Distributors, Inc. 101 N. Brand Blvd., Suite 1950, Glendale, CA 91203.

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