Definition
Growth earned on principal and on previously accumulated interest or reinvested returns.
Hypothetical example
At an assumed 10% annually, 1,000 compounds to 1,210 in two years, versus 1,200 with simple interest.
Keep in mind
Investment returns are not fixed; fees and taxes can reduce the ending value.
Official reference
www.investor.gov ↗Examples are illustrative assumptions, not investment recommendations.