Portfolio
Compound Interest
Compounding is often called the eighth wonder of the world because it makes money grow at an accelerating pace. Each period's gains are added to the base, so future returns are earned on an ever-larger sum.
Time is the crucial ingredient. The longer money compounds, the more dramatic the effect, which is why starting early matters far more than most beginners realize.
Compound interest works in reverse too, magnifying the cost of debt. Understanding it is fundamental to nearly every long-term financial decision, from investing to borrowing.
Example
At an 8% annual return, money left to compound will roughly double every nine years without any new contributions.
Compound Interest — FAQ
What is Compound Interest?
Compound interest is the process by which an investment earns returns not only on the original principal but also on the accumulated gains from prior periods.
Can you give an example of Compound Interest?
At an 8% annual return, money left to compound will roughly double every nine years without any new contributions.
Understanding creates conviction.
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