Compound Interest

Investing

When your investment earnings start earning their own earnings. Like a snowball rolling downhill and getting bigger. For example, you invest $100 and earn $10, so now you have $110. Next year you earn interest on $110, not just $100. Over time this effect is powerful.

Related Terms

Contribution Room

The maximum amount you are allowed to contribute to tax-advantaged accounts like TFSA, RRSP, or FHSA in a given year. This limit increases each year and unused room carries forward. Exception: FHSA only carries forward one year.

Management Fee / MER

The annual fee charged by mutual funds or ETFs to manage your investments. A 2% MER means you pay $200 per year for every $10,000 invested. Lower fees mean more money stays in your pocket. Aim for under 1%, ideally under 0.5%.

Rate of Return

How much your investment grows or shrinks in a year, shown as a percentage. A 7% return means your $1,000 grew to $1,070. Past returns don't guarantee future results.