What you must not forget to do when you get your dividend!

The eight wonder of the world is compound interest . It is the one mathematical formula applied to real life that can make you immensely wealthy.

This is exactly the reason why we buy mutual funds which are growth oriented, because at  15% growth per annum , your initial investment doubles in 5 yrs . It becomes 4 times in 10 and 8 times in 15!

Now how do we really consider this in our stocks which give us dividend and fixed deposits which give us interest post maturity?

The basic point of compound interest is that the growth is re invested back in the business. Without re investment there is no compounding factor.

With that understanding we need to take action on our dividends and our interest rates of our fixed deposits.

We HAVE to invest it back.  Buy new shares in the company with your dividend amount.

It is as simple as that. 

However what usually happens is that the money comes into your account, you see a credit in your account.. think how small it is.. ignore it and continue with your life.

When you do that... you have missed the opportunity of compounding.

In case of fixed deposit.. the money with principal and interest comes back into your account and most likely you keep the interest and re invest the principal back in... money not really needed but spent or left at 3.5% per annum returns.

So make note of this rule.. its a must

If you get dividends.. re invest it immediately into new shares of the same company.

If you get interest from your fd.. re invest the principal and interest into a new fd!

Its simplefinancialsense