Investment Categories that Offer Compounding Interest

Compounding interest is one of the most powerful forces that investors have on their side. With compounding interest and plenty of time, you could potentially make a vast amount of money over your lifetime. Here are the basics of compounding interest and where you can find it.

Compounding Interest

The idea behind compound interest is simple but it is very powerful. This means that every time you earn interest, this money is added to the principal and interest. Then, the new amount is used to calculate future interest, and that is added to the new amount. The idea behind compounding interest is to place more and more interest on something that has already grown. Compounded interest will increase your investment substantially over time.

Investment Categories

There are several different ways that you could take advantage of compounded interest. The most basic example is with a savings account. While this type of account offers low interest rates, you are going to get compound interest. You can also get compounding interest by investing in certificates of deposit. Both of these types of accounts are going to provide you with compounding interest on different intervals. You can also get compound interest by investing in a mutual fund over the long-term. This is going to depend on the performance of the investments in the fund, but it will will eventually provide you with compound interest.

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