The glossary

Compounding

Compounding is the process by which an investment grows exponentially because returns themselves generate further returns. Each period, the new gains are added to the principal, and the next period’s returns are calculated on this larger base. Over long horizons, compounding produces dramatic results: CHF 10’000 invested at 5% per year doubles in roughly 14 years and quadruples in 28. Einstein reportedly called it “the most powerful force in the universe.” Long-term wealth strategies — including discretionary mandates and Swiss Pillar 3a retirement accounts — rely on compounding as their core engine.

Last verified: May 2026