Compound interest is interest that itself produces interest. It is the silent engine of wealth-building, and above all it rewards patience.
Final capital = Initial capital × (1 + return)^(number of years)
The exponent — time — is what makes all the difference.
The power of time
€1,000 invested at 7% a year becomes about €2,000 in 10 years, about €3,870 in 20 years and about €7,610 in 30 years. The second half of the journey pays far more than the first: the effect accelerates.
The most profitable lesson
Starting early, even with small amounts, almost always beats starting late with large ones. Time is the ingredient no amount of capital replaces.
The two enemies of compound interest
- Fees: 1% in annual fees, compounded over 30 years, can cut the final capital by 20% to 25%.
- Interruptions: panic-selling during a fall breaks the compounding chain.
À retenir
- ✓Return matters, but duration matters more.
- ✓Every point of annual fees costs dearly over the long run.
- ✓Regularity — contribute, then let it work — beats market timing.