30 Jul 2019
Investment Income: Power of reinvestment
- Posted by Dejan Pekic BCom DipFP CFP GAICD, Senior Financial Planner
If you take the interest/coupon from a diversified fixed interest portfolio or the rent from a diversified property portfolio or the dividend from a diversified share portfolio and reinvest that income distribution you will compound the asset value higher over time.
This works on the assumption that you can purchase more assets with the investment income.
Alternatively you can choose to spend/consume the investment income which will significantly slow the rate of growth.
The attached chart illustrates the benefit of reinvesting dividend income over 20 years as an example. A powerful outcome for any balance sheet.
Click for chart.
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