Compounding, explained
Compounding is earning returns on both your original money and the returns it has already generated. Over time this snowballs — growth builds on growth, accelerating the longer you stay invested.
Why time matters most
The biggest lever in compounding is time, not the amount. Money invested in your 20s has decades to compound, so even small sums can outgrow larger amounts invested later. Starting early beats trying to catch up.
Harnessing compounding
A SIP is compounding on autopilot — regular investing plus reinvested returns. Reinvesting dividends (DRIP) and staying invested through dips let compounding do its work. Try the compound interest and SIP calculators to see it.
Frequently asked questions
Why is compounding so powerful?
Because you earn returns on your returns, growth accelerates over time — a snowball effect that rewards patience and a long horizon.
How do I benefit from compounding?
Start early, invest regularly (e.g. via a SIP), reinvest your returns and dividends, and stay invested through market ups and downs.
Does compounding work with SIPs?
Yes — a SIP both invests regularly and lets returns compound, which is why starting a SIP early can build a large corpus over decades.