💰 Compound Interest

The Magic of Compound Interest

Albert Einstein reportedly called compound interest "the eighth wonder of the world."Unlike simple interest — which earns returns only on the original principal — compound interest earns returns on both the principal and the accumulated interest. Over time, this creates a powerful snowball effect that grows exponentially.

📐 Formula: A = P × (1 + r/n)^nt
P = Principal, r = Annual rate, n = Compounding frequency per year, t = Time (years)

Simple Interest vs. Compound Interest

Suppose you invest ₩10,000,000 at an annual return of 8%:

• Simple interest after 30 years: ₩10M + (₩10M × 8% × 30) = ₩34,000,000
• Compound interest after 30 years: ₩10M × (1.08)³⁰ ≈ ₩100,627,000

The same principal, the same rate — but compound interest delivers nearly 3× more than simple interest over 30 years.

The Rule of 72

The Rule of 72 is a quick mental shortcut to estimate how long it takes for your investment to double at a given annual return rate.

⚡ Years to double ≈ 72 ÷ Annual Return Rate (%)
At 8%: 72 ÷ 8 = 9 years to double your money.
At 6%: 72 ÷ 6 = 12 years.
At 12%: 72 ÷ 12 = 6 years.

Time Beats Rate: Start Early

The single most powerful variable in compound interest is time — not the rate. Someone who invests ₩1M/month starting at age 25 will typically end up with more than someone who invests ₩2M/month starting at age 35, even though the late starter contributes more per month.

• Start now, even with a small amount. The best time to invest was yesterday; the second best time is today.
• Reinvest all returns. Don't withdraw earnings — let them compound.
• Avoid unnecessary fees. High fund management fees silently eat into your compound returns year after year.