LESSON 1.10 · FOUNDATION

Compounding, plainly

The one bit of maths that makes long horizons behave differently from short ones.

FOUNDATIONS4 MIN READ

Left alone, compounding does something that's easy to say and hard to feel: growth earns growth. A gain doesn't just sit there — it becomes part of the base the next gain is measured against — and through reinvestment, dividends do the same job, buying more shares that go on to pay their own dividends.

None of this is a promise about what any investment will actually return — markets can fall as well as rise, and past growth doesn't guarantee future growth. What it does show, mechanically, is why time horizon matters more than most people expect: the same rate of growth needs far less of it to reach a doubling over thirty years than over three.

£10,000Grows, then grows on the growth£20,000 — same rate, more time

Illustrative only — no rate of return is guaranteed.

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Educational content only. It is not personal financial advice.