Earning returns on your returns

Compounding means your gains start earning gains of their own. Year one you earn a return on your money; year two you earn a return on your money plus last year's return; and so on. Small differences snowball into large ones given enough time.

Why starting early wins

Because compounding builds on itself, the earliest money you invest does the most work — it has the most time to multiply. An investor who starts modestly but early often ends up ahead of one who starts larger but late. Time is the ingredient you cannot buy back.

The flip side

Compounding also works against you with high fees and frequent losses, which quietly compound too. Keeping costs low and avoiding big, permanent mistakes lets the math work in your favour.