Compounding refers to when your asset generates interest, and then that interest is reinvested to create additional interest on the now larger amount.

Put simply, it’s when your earnings generate additional earnings.

Albert Einstein once referred to compound interest as the “greatest mathematical discovery of all time.”

Compound interest only requires two things to work: interest and time. Long-term investors that can resist the temptation to touch any of the principal or interest over the life of their investment are sure to reap the magnificent rewards of compound interest.