In plain words
Growth compounds multiplicatively, so a few extra percent a year multiplies into a massive gap over time. Rates look close on paper; multiplied over decades they are different lives.
Years to double your money ≈ 72 ÷ annual rate %. No calculator needed — one division tells you how long doubling takes.
Three levers grow money — rate, monthly contribution, and time — and time is the only one that compounds the other two. Rate and contribution have ceilings; starting earlier multiplies both and costs nothing.
Two worked examples
The common mistake
The mistake: Treating growth as the same amount every year, instead of growth that earns its own growth.
What’s true: Growth stacks on growth — the last years of compounding earn more than all the early ones combined.
A yearly fee compounds against you
A percentage fee is taken every year from the whole pot, so it compounds just like the return. Two funds with the same return can end far apart once their yearly fees are counted. Each year's fee also removes the growth that money would have earned in every year after.
Where you’ll meet it
- A monthly rate times 12 hides the real costTwo numbers can describe the same loan; the smaller-looking one leaves out interest on interest.
- "Guaranteed 50%" is the scam itselfReal returns wobble — a flat, high, sure number is the signature of money leaving, not arriving.
- Index funds beat most pickersOwning everything cheaply beats guessing the winner — most professionals cannot out-guess the average.
Related terms
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