Reinvest dividends for compounding growth from "summary" of All About Index Funds by Richard A. Ferri
The magic of compounding works best when investors reinvest dividends. When dividends are reinvested, they purchase more shares of the index fund. This increases the size of the investment and generates more dividends, which in turn buy more shares. The cycle continues to repeat itself over time, resulting in exponential growth.
Reinvesting dividends is an effective way to harness the power of compounding. It allows investors to take advantage of the snowball effect, where gains build upon gains. The more dividends that are reinvested, the larger the investment grows. This creates a self-perpetuating cycle that c...
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