Imagine an investor puts £1,000 into a fund, gets on with their life, and the fund then merrily grows at 10% per year. ![]() Supply enough feedstock and you can unleash a self-sustaining process of tremendous force. If you leave your investments to accumulate long enough, then your cash contributions are dwarfed by compound growth. The green line is the Miracle-Gro power of dividends, interest, and/or price appreciation over time. The blue line represents the amount of cash you put into the pot. Visually the growth of compound interest looks like the green line in this graph: What is compound interest?Ĭompound interest is the wealth-snowball effect generated by interest earned on interest. ![]() * Assumes your additions are made at the start of each year.
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