Compounding on small returns but repeated many times can also be a powerful way to generate wealth over time. This is because even small returns can compound into significant amounts when they are reinvested over long periods.
For example, let’s say you have $10,000 to invest and you find an investment that will earn you a 6% return every trade. After the first trade, your investment would have grown to $10,600 ($10,000 + 6% of $10,000). If you reinvest this amount at the same rate for another trade, your investment would grow to $11,236 ($10,600 + 6% of $10,600), and so on.
After 80 trades, your investment will have grown to over one million dollars:
$10,000(1 + 6%)80 = $1,057,960
Compound growth is exponential growth which is much more than arithmetic growth: $10,000(1 + 6% x 80)= $58,000
Compound Return Calculator: