Compound interest, explained
Last verified: 30 Aug 2026
Why time in the market beats timing the market.
Compounding means your returns start generating returns of their own. The effect is modest for a few years and dramatic after twenty.
Saving 200 a month at 7 percent annual return grows to roughly 100,000 over 20 years.
The conclusion is simple: start early, contribute regularly, and avoid unnecessary interruptions.
Frequently asked questions
What is compound interest?
Returns that in turn generate returns. The effect is small in the first years and grows sharply the longer the money stays invested.
How important is time?
Time is the single strongest factor. Ten extra years can matter more for the final capital than a few percentage points of extra return.
Do fees affect compounding?
Yes — fees are charged on past returns too, so they slow the effect year after year.
Everything on this site is general information and is not investment advice.