Compound growth — the mechanics and why early matters. Compound growth means you earn returns on prior returns; mathematically, it’s the repeated multiplication of the growth factor (1 + r). Even modest rates compound into large differences over long periods because growth applies to an ever-larger base. The concrete implication for beginners is simple: time in the market usually amplifies returns more effectively than timing the market. A small additional number of years invested — or starting earlier with smaller amounts — can produce outsized differences in terminal value because the base being multiplied grows each period.

How to apply compound thinking to decisions and behavior. Use compounding to justify steady contributions and reinvestment of dividends. Automate saving (monthly contributions) so compounding can act consistently. When evaluating choices (e.g., retirement accounts or investment vehicles), consider net returns after fees and taxes — compounding multiplies net returns, so even small fee differences matter. Finally, consider the behavioral angle: compound math favors consistency. Sticking to a contribution schedule and avoiding big emotional sell-offs preserves the base that compounds.