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How to build wealth investing in the stock market

by , 03 February 2015

The primary reason for investing is to grow your money. Yes, you may be after income from dividends too, but you want to buy shares and watch their share prices rise over the years.

So how can you increase your chances of making money through investing in the stock market over the long-term?

Read on to find out…

How compounding can work in your favour when you invest

You may have heard of compounding. Compounding is the effect of earning interest on interest, like you earn interest on your savings in the bank.

If you don’t withdraw any of the interest you earn on the initial amount in your savings, you earn interest on your initial deposit plus the interest you already have received from the bank.

As long as you leave your savings and interest untouched, the amount you have in the bank will start to grow exponentially over the years as this process keeps repeating.

How compounding can boost your wealth

By investing money in the stock market, you can also let compounding work in your favour, Bengt Saelensminde in The Right Side explains.

Generally speaking, the money companies earn in profits is double what they pay out to their shareholders in dividends. Companies reinvest the profits they don’t pay out to shareholders to grow their businesses.

By buying shares, this means you have the chance to receive a growing dividend payment over the years as the company itself grows. This growth can lead to significant gains in the share prices of companies as well as growth in dividend payments.

This is good news for you as an investor.

If you’re investing for the long-term, letting compounding work its magic is the best opportunity to build your money.

So there you have it, how to build wealth investing in the stock market.

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How to build wealth investing in the stock market
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