Compounding is the process in which profits are reinvested to generate additional profits over time. In other words, profits will gain more profits in a positive feedback loop. This growth, calculated using exponential functions, occurs because the investment will generate profits from both the initial amount invested and the accumulated profits from previously. Compounding wealth can differ from traditional wealth accumulation such as paychecks and salaries because the more you do it and for longer, the higher the rate of profits. Rather than a straight line angled upwards over time, the line will exponentially increase and get steeper. Check out our compound calculator on our home page to play around with how this can look.