The Power of Compounded Returns

Compounding is a powerful force. When returns are reinvested, the investment’s value can grow exponentially over time.

• Consider a hypothetical $10,000 investment earning 10% a year—the S&P 500 Index’s approximate annualized return since 1926. Over a 45-year working lifetime (age 20 to 65), $10,000 would have grown to $728,905.
• At a 10% annual return, an investment doubles in value about every seven years. So, the earlier you start investing, the larger the potential compounding effect.
• For example, investing $10,000 at age 20 would result in a much higher end value at age 65 than investing the same amount at age 30 or 40.

Compounding can help turn a small investment into substantial wealth. But to harness that power, the sooner you start, the better.

Past performance is no guarantee of future results. Investing risks include loss of principal and fluctuating value. There is no guarantee an investment strategy will be successful. In USD. For illustrative purposes only. S&P 500 Index annualized return January 1926–December 2025 is 10.42%. S&P data © 2025 S&P Dow Jones Indices LLC, a division of S&P Global. All rights reserved.

Dimensional Fund Advisors LP is an investment advisor registered with the Securities and Exchange Commission.