“Money makes money. And the money that money makes, makes money.”
This is perhaps one of the simplest definitions of the power of compounding by Benjamin Franklin. Albert Einstein too was fond of the power of compounding and addressed it as the 8th wonder of the world and cited that the one who understands it, generates it and the one who does not, pays it. In simpler terms, the power of compounding is the potential to generate interest on interest over a long-term period, which results in exponential growth of wealth. So, only if you remain invested for a long time period, will you be able to make the most out of the power of compounding. However, if you do not stick with the plan of remaining invested for the long term, you may suffer hefty income losses.