Is there any relation between compounding in the share market? Like when you invest in a savings account you get a compound unterest, is there anything like that when you buy shares? If not how is buying shares(in the long term) more profitable than a savings account
In: Economics
This is a grave simplification but here goes:
There are companies which pay dividends (a portion of the company’s profit) to their shareholders and companies which don’t. If you get paid dividends (and reinvest them) you basically have compound interest even if the stock value doesn’t change (which they always do, constantly).
With that being said, if you buy shares you expect them to become more valuable over time as the company becomes more valuable (at a higher rate than the interests of a savings account).
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