GLOSSARY TERM
Compound Interest (Compounding)
Compounding means that your money can grow not only from your original investment, but also from the returns it has already earned.
What does this mean in practice?
When your investment produces gains and those gains stay invested, they can start producing gains of their own. Over time, this creates a snowball effect. In the beginning, growth may seem slow, but the longer money stays invested, the more powerful compounding can become.
Example
If you invest €1,000 and it grows by 7% per year, you do not earn returns only on the original €1,000. In later years, you also earn returns on the earlier gains. That is why long-term growth can speed up over time.
Why it matters
Compounding is one of the main reasons long-term investing works. It rewards starting early, staying invested and giving your money time to grow.
Continue your path
Ready for the next step? Follow the Start Here path.
Go to Start Here