Compounding entails generating returns on your accumulated returns from previous periods.
If you take a long-term approach, you could reach the “compound investment tipping point”- the point at which your returns exceed your total investment.
Compounding returns build over time
Reinvesting your returns could potentially enhance your long-term growth.
If you invested £10,000 that yielded 5% returns each year, after one year, your investment would have grown to £10,500. The following year would generate a further 5% on both you initial £10,000 and the additional £500.
Compounding returns could help you reach the compound investment tipping point
If you continue reinvesting, you may eventually reach the compound investment tipping point.
For example, if you made a regular £250 monthly contribution with 5% growth over a 30 year horizon, by the 26th year, your contributions would total £78,000, and your investment growth would be £82,229. You would have reached the compound investment tipping point.
The following steps could help you reach the compound investment tipping point:
– Understand your risk profile
– Diversify your portfolio
– Review your investment costs and fees
To find out more, get in touch.
https://perennialwealth.co.uk/
0117 959 6499
info@perennialwealth.co.uk
Trym Lodge, 1 Henbury Road, Bristol, UK, BS9 3HQ
