Power of Compounding
When you start early and invest regularly – reinvesting any dividends and/or capital gains distributions you earn – you put the power of time and compounding on your side.
Compounding is the process of generating investment earnings on previous investments and earnings. As your investment account grows, you realize earnings on an ever-increasing balance.
Compounding works best the sooner you start investing. Over time, compounding can be a powerful force, turning modest investments into sizeable sums. (see chart)
