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How compounding works

Growth on top of growth, and why time matters more than timing

The idea

Compounding means earning a return on past returns. $1,000 growing 7% a year becomes $1,070 after one year, then 7% of $1,070 the next year, and so on. After 10 years it's about $1,967; after 30 years about $7,612.

Why the early years matter

Most of the growth in a long compounding run comes at the end, because the base is bigger. Starting earlier gives the later, larger years more time to happen.

The catch

Real returns aren't a steady 7%. Markets have fallen 20% to 50% at times and taken years to recover. Fees and taxes also compound, in the other direction. Steady-rate examples are for understanding the math, not a forecast.

Educational only. Describes ideas and how Coteau shows them; not a forecast and not advice.

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Independent research · Not investment advice · Hypothetical unless marked Live · Data: Yahoo Finance (15-min delayed), SEC EDGAR, House Clerk · Important disclosures · Contact desk@coteau.app

Beta 0.9 · Oct 21, 2026