IN PLAIN ENGLISH
Growth building on previous growth, so a return is earned on the original amount and on everything it's already grown by.
WHERE YOU MEET IT
Reflected in your total return over time — the longer the history, the more compounding has had a chance to work.
WATCH OUT FOR
It works in reverse too — losses compound against a smaller base, which is why avoiding big drawdowns matters.
EXPLAINED IN
Educational content only. It is not personal financial advice.