Compound Interest
Compounding is what happens when your returns start earning returns of their own. Over long periods it is the dominant driver of investment growth.
Simple interest pays only on your original capital. Compound interest pays on the capital plus everything it has already earned, so the base grows each period. The difference is negligible over a year and enormous over decades.
Two variables matter most: the rate of return and the time it runs for. Time is the more powerful of the two, because growth accelerates as the base gets larger. Money invested early does disproportionately more work than the same amount invested later, which is why starting sooner beats trying to catch up with larger contributions.
Frequency has a smaller effect. Interest compounded monthly produces slightly more than the same annual rate compounded once a year, which is why comparing the effective annual rate rather than the headline rate gives an honest comparison between products.
Compounding runs in both directions. It is exactly why credit card debt is so damaging, and why ongoing fees matter more than they appear: a 1% annual charge is not 1% of your final outcome but a drag compounding against you every year alongside your returns.
TrustFinance News covers the cost structures of the brokers and platforms where long-term portfolios are held, since ongoing fees compound directly against returns.