# Compound growth Compounding is the process that makes 10 + 10 = 21 rather than 20. If we invest $100 this year and next year in an investment that produces a 10% annual return, we have made 21% by the end of year 2 - $100 grows to $110 at the end of year 1 (100 + 10%) - $110 grows to $121 at the end of year 2 (110 + 10%) - At the end of year 3 we have $133.10