Exponential Growth

AAA

DEFINITION of 'Exponential Growth'

A pattern of increasing prices that resembles the curve of an exponential function. In finance, exponential growth is caused by compounding returns. Given enough time, compound interest can theoretically turn even a relatively small amount of principal into a very large sum.

INVESTOPEDIA EXPLAINS 'Exponential Growth'

While exponential growth is often used in financial modeling, reality is often much more complicated. For instance, stock market returns clearly do not smoothly follow long term averages each year as predicted in simple financial calculations. Thus, other methods of analyzing long term portfolio values and expectations, such as Monte Carlo simulation, have seen increasing popularity.

RELATED TERMS
  1. Compound Annual Growth Rate - CAGR

    The year-over-year growth rate of an investment over a specified ...
  2. Compound

    The ability of an asset to generate earnings, which are then ...
  3. Compounding

    The ability of an asset to generate earnings, which are then ...
  4. Time-Weighted Rate of Return

    A measure of the compound rate of growth in a portfolio. Because ...
  5. Rule Of 72

    A rule stating that in order to find the number of years required ...
  6. Policyholder Surplus

    The assets of a mutual insurance company minus its liabilities. ...
Related Articles
  1. Delay In Retirement Savings Costs More ...
    Retirement

    Delay In Retirement Savings Costs More ...

  2. Understanding The Time Value Of Money
    Investing Basics

    Understanding The Time Value Of Money

  3. How Much To Save To Become A Millionaire
    Options & Futures

    How Much To Save To Become A Millionaire

  4. Capital Gains Tax 101
    Taxes

    Capital Gains Tax 101

comments powered by Disqus
Hot Definitions
  1. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  2. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  3. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
  4. Net Sales

    The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any ...
  5. Over The Counter

    A security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, etc. The phrase "over-the-counter" ...
  6. Earnings Before Interest After Taxes - EBIAT

    A financial measure that is an indicator of a company's operating performance. EBIAT, which is equivalent to after-tax EBIT ...
Trading Center