What is Compounding?
Updated October 21, 2026
Compounding is when your earnings make their own earnings, so growth speeds up over time.
You earn on your money, then earn on those earnings too. It snowballs.
Time is the secret ingredient. Starting early beats starting big.
It works on debt too, which is why high interest debt hurts so much.
Example
$1,000 growing 7% a year becomes about $1,967 in 10 years without adding more.
Questions people ask
Does compounding work in trading?
In theory, but losses compound too and returns aren't steady.
How do I use compounding?
Reinvest earnings and give it lots of time.
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