Financial glossary
Compounding
Compounding is growth calculated on an amount that can include previously added interest or returns.
What compounding means
With compounding, an earlier gain can become part of the base for a later calculation. The rate, time, contribution timing, and compounding frequency all matter.
Why frequency matters
Annual, quarterly, monthly, and other frequencies divide time differently. Comparisons should use consistent rate conventions and contribution timing.
Simple example
If ₹10,000 grows by 10% in one period, it becomes ₹11,000. Applying the same illustrative rate to that new amount in a second period produces ₹12,100.