Portfolio · Investing Glossary
What Is Compound Interest?
Earning returns on both your original investment and your accumulated gains.
The Full Definition
Compound interest is the process of earning returns not just on your original investment, but on all the gains you've already accumulated. It's often called the eighth wonder of the world because of how dramatically it accelerates wealth over time. The longer the time horizon, the more powerful the effect — which is why starting early matters far more than investing more later.
Real-World Example
$10,000 invested at 7% annual return becomes $76,123 after 30 years with compounding. The same amount kept in cash earning nothing would still be $10,000. The $66,123 difference is entirely the work of compounding.