Compounding

Compounding is what happens when returns are reinvested and start earning returns of their own: ₱100 at 10% pays ₱10 in year one but ₱11 in year two, because year two pays interest on the interest. The curve is agonizingly flat for years and then steep — which is why starting late quadruples the effort needed to reach the same target, and why this course treats time-in-the-market as the retail investor’s one real edge.

First used in: 0.2 · Your money as a system