Investing · General financial education

Compound growth

When interest stays invested, it can earn interest too. That is compound growth.

In more detail

Reinvested returns change the base for future returns. Time, contributions and the assumed return affect the result. For investments that fluctuate, returns are neither constant nor guaranteed.

Background

With a constant annual rate r and no deposits, K(n) = K(0) × (1+r)^n. Monthly contributions add an annuity component. Costs, taxes and inflation separate nominal results from real spending power.

An example

At an assumed 5%, €1,000 becomes €1,050, then €1,102.50 in year two. This is a model calculation.

A common misconception

The compound calculator shows what you will receive.

It shows a scenario with a constant rate. Not a forecast, and without tax or fees.

Source: Investor.gov · Compound growth. Last reviewed: 2026-11-01. Editorially reviewed on 2026-11-01. Next review 2027-11-01. Version 0.2.0. Finmon explains. It does not advise. Not investment, tax or legal advice.