The principle of compounding interest is a remarkable example of how money can grow. Compounded interest is primarily "earning interest on interest" and will make a deposit grow at a faster rate than simple interest, which is interest calculated only on the principal amount. For investors in the stock market through mutual funds or exchange-traded funds (ETF's), this principle also works in the reverse on the fees and expenses incurred in investing. The fees and expenses are compounded and will reduce your net return, sometimes by a significant amount.
