Investing glossary
Compound interest
Compound interest is the interest earned on both your initial capital and the interest already accumulated, producing exponential growth the longer it runs.
Unlike simple interest (always calculated on the initial capital), with compound interest the base you earn on grows every period, so the final years of a long investment usually add far more wealth than the first ones.
This is why starting to invest earlier — even with a small amount — usually matters more than investing a larger amount a few years later.