Compounding

MathematicsFinanceGrowth

Compounding is the process where the value of an investment grows exponentially over time as returns generate further returns.

Introduction

Compounding is the process where the value of an investment grows exponentially over time as returns generate further returns.

Core Principles

  1. Exponential Growth: Reinvestment accelerates growth.
  2. Time Factor: The earlier compounding starts, the greater the effect.
  3. Reinvestment: Continuously reinvesting returns enhances growth.

Applications

  • Personal finance for long-term wealth building.
  • Business strategy for reinvesting profits.

Related Resources

  • Book: "The Snowball" by Alice Schroeder.
  • Tools: Compound interest calculators.

Related Topics

Mental Models Related

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Professional Applications

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