Compound returns
Returns that generate further returns when they remain invested.
Definition
Returns that generate further returns when they remain invested.
Why this concept matters
Over time, this mechanism can accelerate savings growth.
How it works
In each period, returns apply to the starting capital and previously retained gains. New contributions also begin generating returns from the date they are invested.
Calculation guide : Capital without contributions = starting capital × (1 + rate) ^ time
What to watch
Its effect depends on actual returns, fees, tax and time.
Simple example
At 5% a year, £10,000 grows to about £16,300 in ten years before fees and tax.
Example currency : United Kingdom (GBP). The reference country controls the example currency.
Try the mechanism
Educational estimate only, with no personalised advice or guarantee.Related concepts
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