Compound interest
The quiet engine behind long-term investing: how your returns start earning returns of their own.
What compounding means
Compounding is when your investment earns a return, and then that return starts earning returns too. Your money grows, and the growth itself grows. Over time, the curve bends upward faster and faster.
The two things that feed compounding are time and regular contributions. Time lets each year's growth build on the last. Contributions keep adding fuel along the way. This is why starting early and staying consistent matters so much.
You earn on the money you put in, and then you earn on the money you already earned. Give it enough time and the growth takes on a life of its own.
Why time matters more than amount
A smaller amount started earlier can outgrow a larger amount started later, because it has more years of compounding behind it. That is not a reason to wait - it is a reason not to. The earlier you start, the more time the curve has to bend.
- Start early. Even a modest amount, given decades, can grow surprisingly large.
- Contribute regularly. Steady additions keep the engine running through good and bad markets.
- Stay invested. Selling during a dip interrupts the compounding you have already earned.
Try it yourself
This calculator shows how contributions, time, and an assumed return combine. Adjust the numbers to see the balance grow.
This is an illustration of how compounding can work, not a forecast. Real returns vary from year to year, and your balance could end up higher or lower than shown.
Read this as an illustration, not a promise
The example above uses an assumed annual return you choose. Real returns vary from year to year - some years are down - and your actual balance could end up higher or lower than shown. It is an educational illustration to build intuition, never a forecast or a guarantee of any outcome.