How to make your money work for you with compound growth

When you invest in stocks and funds your money has the potential to grow over time, thanks to the impact of compound growth.

What’s compound growth?

Compound growth is the idea that when your money grows, the new money that you’ve made will also grow if you keep it invested.

How does compound growth work?

Let’s step through an example. If you have $100 invested and it grows by 10% over a year, at the end of the year you have $110—that's a growth of $10! Now say the next year your $110 grows at the same rate of 10%. At the end of the year, you have $121—your investment has grown by even more, $11 that year.

This increase becomes really powerful over the long term. If that $100 grows by 10% for 20 years, in that 20th year it will have grown by nearly $573, for a total of $672.75!

Of course, 10% growth is a hypothetical example, as every year in the market is different. In some years it's higher, and in other years it's lower.

But the point is simple: To grow your money and build some wealth, consider investing in stocks or funds that offer higher potential returns. Yes, alongside higher potential returns also comes a higher risk of investment loss, but if you can keep your money invested for the long haul, it could pay off with the help of compound growth.

Read more: Beating inflation through investing