We’d like to remind Forumites to please avoid political debate on the Forum.

This is to keep it a safe and useful space for MoneySaving discussions. Threads that are – or become – political in nature may be removed in line with the Forum’s rules. Thank you for your understanding.

📨 Have you signed up to the Forum's new Email Digest yet? Get a selection of trending threads sent straight to your inbox daily, weekly or monthly!

The Forum now has a brand new text editor, adding a bunch of handy features to use when creating posts. Read more in our how-to guide

Stocks and Shares Compounding

Rich48 · 2023-06-12 14:48:29

Hi all, looking for some advice about investing in stocks and share ISA. Videos on Youtube etc tell us about the benefits of compounding and how this can increase the value of investments over time. 1. Am I right in saying Index funds such as S&P 500 don't automatically re-invest any increase in share value? 2. If your…

Comments

Bravepants Posts: 1,664 Forumite

13 June 2023 at 2:04PM

Compounding can also refer to the growth of stocks due to companies holding back profits to grow the company. As a company grows bigger you would expect the output to increase, which generates more profit, which can be used to grow the company further. So don’t just think of compounding being just due to dividends being reinvested.

If you want to be rich, live like you're poor; if you want to be poor, live like you're rich.
1