Time has the greatest influence on your investment portfolio than any other force. Investments have the potential to increase in value over time and hence longer the time frame the greater the value. That’s why, financial advisors always recommend to start saving early in order to gain benefits from the power of compounding. Let’s explore this concept further.
Compounding basically is long term investment strategy which means to re-invest ones earnings from interest or dividend for receiving additional units
The benefit from compounding comes primarily from the fact that income keeps growing the principal to generate higher returns as time progresses
Higher rate of returns or longer investment duration plays a key role that leads to increase in principal amount
Hence, we can say that a successful investment planning is all about making the most of compounding by getting time on one’s side. Hence the earlier you start investing, the greater will be the power of compounding