What is 'compounding' ?

The seemingly accepted definition:
* Compounding - (Stock market): Definition



Compounding
An investment strategy that combines the power of time with accumulating earnings to potentially increase an investor's portfolio value. Each time the investments generate earnings, those earnings are added to the original principal. This new principal balance, in turn, generates additional earnings that are again reinvested.

If a company has such a good potential to grow that for both the company and the shareholders it makes more sense to invest any earnings in further growth of the company - so that there are no dividends at all

And that the share price then grows 8% each year
Isn't this also compound growth that a shareholder benefits from ??

 

Hi,

Share growth means the shares are more valuable.

ei. 100 shares = $1000 . 1 share = $10
share price = $10.30 . value now $1030


Dividend reinvestment buys more shares.

ei. 100 shares = $1000 . 1 share = $10
$30 dividend = + 3 shares . 103 shares value = $1030




Johny.