A question on many investors mind is that we always say that we invest because we want to make our money work harder. Working harder here is to make use of the power of compounding over time.

However, how do we relate this to dividend income investing? What are the things we need to watch out for? Today we will fit this into our action plan to compound dividends.

Power of compounding

Power of compounding over time in layman terms is to earn on an investment, put that earnings back into the investment or another investment to earn more and continue to do that.

If you invest $1000 in Singapore Press Holdings (SPH) and you invest in SPH knowing it will earn you $60 for a 6% yield per year.

If you take the $60 out of your portfolio to buy some other things you want, in 20 years you …