"The Compound Effect in investing refers to the idea that small but steady changes over time can lead to exponential growth. In the context of investing, this means that small investments held over a long period of time can lead to significant growth in the investment portfolio.
The compound effect is based on the fact that returns from investments are not only attributable to the original capital invested, but also to the returns generated by previous investment returns. This leads to an exponential growth curve, as each new profit forms the basis for future profits.
In order to take advantage of the compound effect in investments, it is important to early start and regularly to invest. This way, small amounts can grow over time and lead to significant returns. It's also important to hold investments for a longer period of time to get the full benefit of the compound effect."
