How does compound interest work when investing in stocks and ETF’s such as in taxable brokerage account?

Question

For example say someone invested $300 in stock A. One day the total balance in account is 297 and next day it is 303. How does interest earned work in stocks / ETF’s?

In high yield saving account it’s paid monthly but how does it work in investing like in a taxable brokerage account.

Is all the interest earned in investing paid out monthly and that amount paid out monthly is permanent?

In: Other

Answer 1

You don’t earn interest on ETFs or stocks. There are two ways to make money from owning stocks:

1. You sell it for more than you bought it
2. The company pays out a dividend. This is a “on X date, we will pay all of our shareholders Y cents per share” type deal, not a compounding percent like interest (you could re-invest the dividends to buy more shares and then *if* the company issues another dividend later you’ll have more shares so it can compound that way, but it’s not like a bank account)