Compounding is the process of earning returns on both the initial principal and the accumulated earnings. It is a cornerstone of long-term wealth creation. The earlier one starts investing, the more they benefit from compounding due to the exponential growth over time. For example, an investment of ₹5,000 monthly growing at 12% annually can turn into over ₹1 crore in 20 years. This highlights the importance of consistency and patience. SIPs in mutual funds, reinvested dividends, and long-term stock holdings all leverage compounding. Avoiding premature withdrawals and staying invested even during downturns allows compounding to work unhindered. Financial discipline, realistic goal setting, and a clear investment strategy enhance compounding benefits. It is important to avoid chasing quick returns and instead focus on time in the market rather than timing the market. Compounding transforms small, regular contributions into significant wealth over time.