Using compounding to grow more wealth

It's rather simple to make your money work for you. Here is a question. Do you spend the income you earn on your investments or do you re-invest it ?

What is compounding technique ?
Well to begin with it goes hand in hand with the concept of re-investment. Every time you re-invest your income from interest/dividends, you capital or principal that is re-invested goes up. The next time you earn interest/dividends, it is on this enhanced capital, and is therefore higher than what you would have received if you chose not to re-invest.
Albert Einstein once called compounding the greatest mathematical discovery ever!

Use 2 magic wands to grow you wealth :

1. Compounding and

2. High frequency of compounding

Apart from time, another factor that influences compounding is frequency of compounding. You have probably heard of investments that offer monthly, quarterly and annual compounding. what this simply means is that interest is calculated at different frequencies (every month for monthly, every quarter for quarterly, etc.) and re-invest. The shorter the compounding frequency, the earlier your interest is.

You can see that re-investment (compounding) makes a huge difference in long term!