Compound growth

Compound growth means that earlier gains become part of the amount that can grow next.

With 10 percent growth, 100 becomes 110 after one period. Another 10 percent makes 121 because the second gain is calculated on 110. Losses also compound, so a fall of 50 percent needs a rise of 100 percent to recover.

Related terms

• Return
• Total return
• Drawdown

Investing glossary

Stock explanations