Stock Market Returns - The Wonder of Compounding

This post is a guest contribution by Prieur du Plessis, writer of the Investment Postcards from Cape Town blog. Albert Einstein described compound growth as the eighth wonder of the world. Although he may have passed away in 1955 - coincidentally the year when yours truly saw daylight for the first time - the concept of compounding remains the single most important principle governing investment. Back to basics: Compounding simply means that you can earn interest on your principal investment amount, as well as earn interest on top of interest. The power of compounding can make an investment grow much faster than would otherwise have been the case, and is obviously based on the assumption that interest or dividends are reinvested in the same asset. The raison d'être of investment or wealth management is to maintain, or... [read full story]