Compound Interest Is the Market's Most Powerful Force: Here's How It Actually Works

Why do people invest? It's not just to get a tax break from contributions to a 401(k). The ultimate reason is that we want our money to grow for the future. The way that money grows, and the biggest reason to invest, is the power of compound interest. With compound interest (also called compound returns for stocks), an investment grows over time by earning returns, which then earn additional returns.

Compound interest makes money build upon itself. Your money makes money without you having to work for it. This might sound like magic or an impossible self-propelling perpetual motion machine. But it's not magic; it's math.

Here's how the math of compound interest works, and how it can help your investments grow for years to come.

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