Compound interest eli5:
Hello,
So I am little confused, I know that compound interests is interests on interests. But how you achieve it? Say that I invest 100 dollars in a Roth IRA in a eft fund that pays 2% dividends, after a year it grows to 102 dollars(plus appreciation with is like 7%) so like after a year I “have” around 110 dollars and as years go on this cycle repeats? Is this what compounding is in ROTH Ira?
In: Economics
Yes, and 110 dollars gets you about 11 dollars next year instead of 10 because you have an additional 10 dollars in it. Next year that is 12.1 dollars, etc.
Make sure you enable dividend reinvestment though.
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