A balance can earn or lose value on an amount that already includes earlier changes.
Follow two small steps
Take an imaginary balance of 100 credits and apply a fictional 10 percent gain. It becomes 110. Apply another 10 percent gain and it becomes 121, because the second change uses 110 as its starting amount. This repeated multiplication is the basic mechanism behind compounding. The numbers are chosen to make the arithmetic easy to follow.
A loss changes the base too
Now start with 100, lose 10 percent and then gain 10 percent. The balance moves to 90 and then 99. Equal percentages in opposite directions do not cancel because they act on different starting balances. The order of multiplication for the same two returns does not change that final result when there are no contributions or withdrawals.
Look at a path, not just a label
The Investment Lab applies one fictional weighted return in each of ten years. Its chart shows the balance after each step. Some paths finish above the initial amount while others do not. None of those paths is a promise. A label such as growth describes the scenario’s design, not something that automatically happens to real invested money.
Keep nominal numbers separate
The lab reports virtual credits without adjusting their purchasing power. It also excludes charges and tax. A larger displayed number therefore should not be read as a complete real-world gain. Use the game to understand the arithmetic, then recognize which extra inputs would be needed to answer a different question.
Try the idea in the money playground, or explore another lesson in the notebook.
