Compounding effect!

Compounding in the World of finance refers to the ability of money to grow itself. It builds upon the fact that money can grow exponentially when you keep reinvesting your profits. Assuming the gains of year 1 get reinvested for year 2, gains of year 2 gets reinvested for year 3, gains of year 3 gets reinvested for year 4 and so on. So, technically you are holding the stock and not selling. Compounding is most commonly associated with long-term investing, such as investing in stocks, bonds or mutual funds. To give an example, the stock of Titan went from Rs.0.15 to Rs.2,535, if held for last 20 years! Rs.1 lakh invested 20 years ago would now be Rs.169 Crore!