What is Compounding?
Compounding is when the returns on an investment start earning returns of their own. Over time, gains build on top of earlier gains, so growth can speed up the longer money stays invested. Compounding works the same way in reverse with costs and losses, so fees and drawdowns can compound against you too.
Why Compounding matters
It is the main reason time in the market is treated as such a powerful factor in long-term investing.
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