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Investing Principles

Compounding

Unlocking Accumulation. The goal of investing, in the simplest of terms, is to turn your money into more money. While there are no guarantees your investments will perform well, the power of compounding can increase your returns in times of growth.

Compounding becomes more powerful the more your investments grow. And to increase that growth potential, you may have to take on more risk. Risk can lead to potential loss of principal, but it can also lead to greater rewards.

Look at it this way:

  • You invest $100,000 and your investment grows 8% in a year. You end up with $108,000, for a net gain of $8,000.
  • If you leave those earnings invested, and your investment grows 8% the next year as well, you end up with $116,640, for a gain of $8,640 in the second year — because the $8,000 you gained in year one grew by 8% as well.

As you can see in the accompanying example, when projected over a 20-year period, leaving your earnings reinvested allows them to keep building on themselves, leading to increases in growth potential.

The Difference Returns Can Make On A $100,000 Investment
Twenty-year hypothetical on the difference returns can make.

Source: The 20-year period for the 2.1% average inflation rate occurred between 1/1/1997-12/31/16. Data by Morningstar calculated on 3/27/17.

The hypothetical example comparing four different rates of return is for illustrative purposes only. The hypothetical rates of return are not guaranteed by Jackson, and should not be viewed as indicative of the past results or future performance of any particular product. The example assumes an initial investment of $100,000 and does not take into account the effect of taxes or inflation. Past performance is no guarantee of future results.

©2017 Morningstar, Inc. All Rights Reserved. Used with Permission. This information contained herein is: 1) proprietary to Morningstar and/or its content providers; 2) may not be copied or distributed; and 3) is not warranted to be accurate, complete, or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.

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Annuities are long-term, tax-deferred vehicles designed for retirement. Variable annuities involve investment risks and may lose value. Earnings are taxable as ordinary income when distributed and may be subject to a 10% additional tax if withdrawn before age 59½.

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Annuities are issued by Jackson National Life Insurance Company® (Home Office: Lansing, Michigan) and in New York by Jackson National Life Insurance Company of New York® (Home Office: Purchase, New York). Variable annuities are distributed by Jackson National Life Distributors LLC, member FINRA. May not be available in all states and state variations may apply. These products have limitations and restrictions. Contact Jackson for more information.

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CMN16260 09/17

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