Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
Silver Outlook Is 'Excellent' - 23rd July 19
Why The Coming Silver Rally Might Be The Greatest - 23rd July 19
We Are in for Decades of Ultra-Loose Monetary Policy - 23rd July 19
Gold & Gold GDX Stocks Ripping. What’s Next? - 23rd July 19
Stock Market Breadth Warning Signs for the Stock Market’s Rally? - 23rd July 19
U.S. Recession Watch: The Six-Cycle Forecast - 23rd July 19
US Dollar Index tightly wound between: US Bond Yields down on safety flows - 23rd July 19
Stocks Bull or Bear? The Market’s Message - 23rd July 19
This Dividend Aristocrat Is Leading the 5G Revolution - 22nd July 19
What the World Doesn’t Need Now is Lower Interest Rates - 22nd July 19
My Biggest 'Fear' For Silver - 22nd July 19
Reasons to Buy Pre-Owned Luxury Car from a Certified Dealer - 22nd July 19
Stock Market Increasing Technical Weakness - 22nd July 19
What Could The Next Gold Rally Look Like? - 22nd July 19
Stock Markets Setting Up For A Volatility Explosion – Are You Ready? - 22nd July 19
Anatomy of an Impulse Move in Gold and Silver Precious Metals - 22nd July 19
What you Really need to Know about the Stock Market - 22nd July 19
Has Next UK Financial Crisis Just Started? Bank Accounts Being Frozen - 21st July 19
Silver to Continue Lagging Gold, Will Struggle to Overcome $17 - 21st July 19
What’s With all the Weird Weather?  - 21st July 19
Halifax Stopping Customers Withdrawing Funds Online - UK Brexit Banking Crisis Starting? - 21st July 19
US House Prices Trend Forecast 2019 to 2021 - 20th July 19
MICROSOFT Cortana, Azure AI Platform Machine Intelligence Stock Investing Video - 20th July 19
Africa Rising – Population Explosion, Geopolitical and Economic Consquences - 20th July 19
Gold Mining Stocks Q2’19 Results Analysis - 20th July 19
This Is Your Last Chance to Dump Netflix Stock - 19th July 19
Gold and US Stock Mid Term Election and Decade Cycles - 19th July 19
Precious Metals Big Picture, as Silver Gets on its Horse - 19th July 19
This Technology Everyone Laughed Off Is Quietly Changing the World - 19th July 19
Green Tech Stocks To Watch - 19th July 19
Double Top In Transportation and Metals Breakout Are Key Stock Market Topping Signals - 18th July 19
AI Machine Learning PC Custom Build Specs for £2,500 - Scan Computers 3SX - 18th July 19
The Best “Pick-and-Shovel” Play for the Online Grocery Boom - 18th July 19
Is the Stock Market Rally Floating on Thin Air? - 18th July 19
Biotech Stocks With Near Term Catalysts - 18th July 19
SPX Consolidating, GBP and CAD Could be in Focus - 18th July 19

Market Oracle FREE Newsletter

Top AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

Dividend Reinvestment and Compounding Interest

Companies / Investing 2010 Jan 06, 2010 - 10:53 AM GMT

By: Nilus_Mattive

Companies

Best Financial Markets Analysis ArticleWhen we were first planning our trip to India, my wife — and all her family members — insisted that I make an effort to go see the Taj Mahal.


My initial response was something like — “Yeah, I’m sure it’s impressive, but I’d really rather just avoid the tourist spots altogether. I want to see the real India, or whatever’s left of it. You know … farms, markets, places in the middle of nowhere.”

Still, I begrudgingly took a ride to Agra. And I have to say — even though the site was swarmed with the usual camera-toting tourists — the Taj is still pretty darn spectacular. It truly ranks up there as one of the greatest wonders of the world.

Of Course, I Still Find Compounding Interest Just As Impressive!

And I’m not the only one who thinks so. In fact, the phenomenon of compounding interest has long been referred to as the “eighth wonder of the world.” (Many people attribute that label to Albert Einstein, though I have never been able to find adequate documentation.)

The Taj Mahal is an impressive sight.
The Taj Mahal is an impressive sight.

When you step back and think about the power of this simple mathematical effect, you can see why it’s so darn wondrous.

For example, if you put $10,000 into a savings account with a 6 percent annual interest rate, you’ll have $10,600 after one year. Next year, you’ll be earning 6 percent on the $10,600 rather than just the original $10,000.

It might not seem like a big deal at first, but the effects over time can really add up. Ten years later, you’d have almost $18,000.

Perhaps the best part is that the bigger the numbers, the greater the effect becomes.

Likewise, the longer you let it work for you, the faster and faster things accelerate!

This Is Precisely Why I Love Dividend Reinvestment for Longer-Term Portfolios …

Compounding interest is nice enough in a regular savings account.

But what you should realize is that it’s also at work whenever you reinvest your dividend payments into additional shares of stock.

In fact, it can work two or three times as hard for you.

Here’s why:

First, when you reinvest dividends into new shares of stock you’re obviously increasing your overall position. And assuming that the shares rise in value over time, you stand to reap bigger and bigger gains.

DRIPS are an easy way to get your money to grow faster.
DRIPS are an easy way to get your money to grow faster.

Second, by owning more shares you are also setting yourself up for bigger and bigger dividend payments over time, which will continue to build on themselves. That’s a very powerful form of compounding.

Third, if you choose companies that consistently increase their dividend payments … you will benefit from yet another layer of powerful compounding.

This is precisely how some people have managed to build massive wealth from relatively small positions in companies like General Electric, Altria (formerly known as Philip Morris), and other old-line dividend payers.

And in my view, it is precisely how you can do the same.

The best part is that dividend reinvestment plans (DRIPS) now make this easier to do than ever before.

So I encourage you to consider reinvesting whatever dividends you receive right now, unless you absolutely need the income immediately.

Remember, even something as large as the Taj Mahal began with a couple of small stones!

Best wishes,

Nilus

P.S. The Taj Mahal is not the only amazing thing I’ve seen on this trip so far. And I’ll be sharing everything with my Dividend Superstars subscribers as soon as I get back to the U.S. If you want to be among the first to get those insights (and any specific investment recommendations) subscribe to my newsletter today!

This investment news is brought to you by Money and Markets . Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules