A reminder of the rules for the Snowball, there are only 3.

  1. Buy Investment Trusts that pay a dividend and use those dividends to buy more Investment Trusts that pay a dividend.
  2. Any Trust that drastically alters their dividend payments must be sold, even at a loss.
  3. Remember the rules.

Investment Trusts are the favoured investment as most have reserves to pay the dividend in times of panic as during the Covid market melt down.

Snowball Effect Investing | Compound Your Wealth Like Warren Buffett

August 29th, 2024 by Bob Ciura

The snowball effect shows the power of compounding.

When you push a small snowball down a hill, it continuously picks up snow. When it reaches the bottom of the hill it is a giant snow boulder.

The snowball compounds during its travel down the hill. The bigger it gets, the more snow it packs on with each revolution. The snowball effect explains how small actions carried out over time can lead to big results.


Source: Calvin & Hobbes

In the same way, investing in high-quality dividend growth stocks can generate large amounts of dividend income over long periods of time. That’s because dividend growth stocks tend to pay rising dividends every year. And then you can reinvest those rising dividends to purchase more shares each year. This results in an increase in the total number of shares you own, as well as an increase in the dividend per share, for a powerful wealth compounding effect.