The Quiet Power of Compounding: Staying Ahead of Inflation

$1 over 100 years

In 1926, one US dollar put into America’s largest companies, with every dividend reinvested, would have grown to about $14,751 by the end of 2025. The lesson is simple: given enough time, growth builds on growth.

What history shows
The same dollar left in long-term government bonds grew to about $117, and in short-term government bills to roughly $25. Shares rewarded patience far more than safer assets, though never smoothly.
Inflation takes its share too. After rising prices, that $14,751 is worth about $814 in today’s money, which is still more than 800 times the original stake.
Australia has a strong story of its own. Since 1900, Australian shares have returned about 6.7% a year above inflation, among the best results of any country studied. That includes 2008, when the local market fell more than 42% in real terms in a single year.

What it means for you
Few of us will invest for a hundred years, and few should hold nothing but shares. As we know, taxes, costs and spending along the way all cut into those headline numbers. The useful lessons are more practical.
Time in the market matters more than timing it. Major falls have historically been followed by recoveries, so the right mix of growth and defensive assets is the one you can hold through the hard years. Keeping tax and costs low lets more of your return keep compounding for your family. If you would like to talk about how this applies to your own portfolio, your Hewison adviser is always happy to start the conversation.

To read further about the power of compounding visit Yashera Raddalgoda’s August Blog.

Past performance is not a reliable indicator of future performance. This article is general information only and does not take into account your objectives, financial situation or needs.