Snowball investment strategy is based on the idea of accumulating profits and gradually increasing capital over time, like a snowball that starts small and grows as it rolls. This strategy takes advantage of the principle of compound interest, as it reinvests the returns generated from investments to increase the size of the portfolio.
Key elements of the snowball strategy:
1. Continuous investment:
• Investing small amounts periodically and regularly (monthly or annually).
• Investing can be started with small amounts and does not require a large capital at the beginning.
2. Reinvesting returns:
• The profits you achieve (whether dividends or capital gains) are reinvested instead of withdrawing them.
3. Long-term investment:
• The strategy relies on patience, as profits accumulate over time.
• It requires years of continuous investment to achieve noticeable growth.
4. Portfolio diversification:
• Reducing risks by diversifying investments in stocks, bonds, or mutual funds.
5. Taking advantage of compound interest:
• Each return invested generates new returns, which increases the speed of growth over time.
