What If You Invested $20/day?

What is the Latte Factor?

The "Latte Factor" is a behavioral finance concept popularized by author David Bach. It illustrates the incredible power of compound interest by showing how small, seemingly insignificant daily expenses (like a $5 latte) can grow into hundreds of thousands of dollars if invested in the stock market over a long period.

Frequently Asked Questions

Is the Latte Factor theory realistic?

The math is completely accurate � the power of compounding is real and transformative. The debate is about lifestyle trade-offs. The point is not to never enjoy a coffee, but to be conscious of habitual small spending and understand the long-term opportunity cost of every purchase.

What rate of return should I use for the Latte Factor calculation?

The most commonly cited figure is 7%, which represents the approximate inflation-adjusted historical average annual return of the S&P 500 over long periods. For more conservative estimates, use 5-6%. For very long time horizons, 7-8% is reasonable.