Compound interest
Earning on what you've already earned: gains are reinvested and, over time, produce gains of their own.
If you invest 1,000 and earn 10%, you have 1,100. The next year, the 10% is calculated on 1,100, not on 1,000. That difference looks small at first and becomes huge over the years.
The chart is plain arithmetic, with a fixed 7% rate as an example: over 40 years, $1,000 grows to $14,974 reinvesting and to $3,800 without reinvesting. At 20 years they stood at $3,870 versus $2,400: most of the gap comes at the end.
With real data: one dollar put into the US stock market in June 1926 became $19,133, with dividends reinvested. History isn't a straight line, but the effect is the same.
With a rate r per period and n periods: value = capital × (1 + r)n. Without reinvesting: capital × (1 + r × n). The gap grows exponentially with n.
The rule of 72 lets you estimate in your head: money doubles in about 72 / r years. At 7%, every 10 years; at 10%, every 7.
In real life the rate changes every year, and fees, taxes and inflation compound too, but against you. That's why Compass never projects with a fixed rate: it uses real historical returns.
- Reinvesting (compound)
- Without reinvesting
An arithmetic example with a fixed 7% rate, not a forecast.
Try it yourself
Move the rate and the years. The green line reinvests the gains every year; the dotted one takes them out.
- Reinvesting
- $7,612
- Without reinvesting
- $3,100
- Gains on gains
- $4,512
- Reinvesting at 7%
- Without reinvesting
An arithmetic example with a fixed rate: not a forecast.
The cost of waiting
$100 every month until August 2026, with each month's real returns. The only thing that changes is when you started.
| Starting in | Put in | Today | Versus starting first |
|---|---|---|---|
| S&P 500, since 30 years ago | |||
| Sep 1996 | $36,000 | $252,737 | — |
| Sep 1997 | $34,800 | $232,371 | −$20,366 |
| Sep 1999 | $32,400 | $203,454 | −$49,283 |
| Sep 2001 | $30,000 | $180,017 | −$72,720 |
| Bitcoin, since 10 years ago | |||
| Nov 2016 | $12,000 | $114,837 | — |
| Nov 2017 | $10,800 | $53,351 | −$61,486 |
| Nov 2019 | $8,400 | $24,169 | −$90,668 |
| Nov 2021 | $6,000 | $11,120 | −$103,717 |
In the S&P 500, starting 5 years later meant putting in $6,000 less, but ending with $72,720 less.
No fees or taxes. What happened doesn't say what will happen.
Where you see it in Compass
- Simulator · SimulateIn Simulate, with each month's or week's real returns.
- One dollar a dayIn “One dollar a day”, with daily purchases.
Related terms
Frequently asked questions
What is compound interest in simple words?
Earning on what you've already earned. Gains are added to the capital and also earn gains the next period.
How long does it take for money to double?
By the rule of 72, about 72 divided by the yearly rate: at 7%, about 10 years. It's an approximation for fixed rates; in reality, returns change every year.
Calculated and reviewed by Compass. Sources, checks and method
Figures with data as of October 26, 2026. Educational content. Not financial advice. Past results don't guarantee future results.