Yes, it's kind of like compound interest in the sense that if your ETF increases in value by 6% one year then 7% the next year, yes the second year is like making 7% on 106% of your original value. But that's just one way of looking at the gains, you just happen to be picking two particular dates to look at gains. Thinking about your gains as compounding is more about how you look at the gains than a fundamental mechanism. If you see someone writing that "expected" gains over the next ten years are 7% annually (or 4% or 12%), that is usually a compound rate of return and includes price gains as well as reinvested dividends. So it's a way of comparing expectations ... but that's all it is, and returns are highly likely to be significantly different than what anyone expects or predicts.