Compounding interest occurs when the interest earned on an investment is reinvested, leading to even more interest being earned in subsequent periods. This compounding effect can help an investment grow at an exponential rate, allowing for substantial gains over the long-term. By contributing a regular amount and allowing the interest to compound over time, investors can build a substantial nest egg for retirement.

However, it is important to note that compounding interest can work against investors who are paying interest on loans or credit card debt. This is because the interest on the outstanding balance is compounded, leading to a higher total amount owed over time. Overall, understanding the power of compounding interest is essential for investors who want to build long-term wealth and achieve their financial goals.

In this episode, Jason Gutierrez will be discussing the concept of compounding interest, together with its pros and cons.