Compounding returns are a powerful generator of wealth

With equities able to deliver a return of 14 percent a year in nominal (before-inflation) terms, you can harness the power of compounding if you can leave your money invested for a long time.

Long-term Perspectives cites the example of an investment of R1 000. On a return of 14 percent a year with dividends reinvested, the investment will grow to R3 712 after 10 years. But after 20 years, it will be worth R13 780. The greatest benefits of compounding, when you earn returns on your reinvested returns, occur in the second decade.