InsiderFlow › Glossary › What is compound interest?

What is compound interest?

Compound interest is the gain generated on previously earned gains: the silent engine of long-term growth.

If you reinvest your gains instead of spending them, next year's return is calculated on a larger base. At first the effect is imperceptible, but over decades it becomes explosive: it's why starting early matters more than investing big.

The "rule of 72" gives a quick estimate: divide 72 by the annual return to get the years needed to double your capital. At 7% a year, about 10 years.

Concrete example

$10,000 at 7% a year becomes $20,000 in 10 years, $40,000 in 20 and nearly $80,000 in 30: the last ten years alone generate more than the first twenty.

How you see it in InsiderFlow

On InsiderFlow these concepts come alive on real data: what big funds and insiders are buying, explained every day.

Frequently asked questions

Did Einstein really call it the eighth wonder of the world?

The quote is probably apocryphal, but it captures the idea: exponential growth always surprises human intuition.

How do I harness compounding in practice?

By reinvesting dividends and coupons (or using accumulating ETFs) and staying invested as long as possible.