The process by which the value of an investment increases exponentially over time because of compound interest.
The accrual of interest earned on an investment and its reinvested earnings.
The process of a present value earning interest and growing to a future value where the interest is earned on previously paid interest.
Interest paid on interest from previous periods in addition to the principal. Though small at first, the additional returns can become substantial over time.
The process of accumulating the time value of money forward in time. For example, interest earned in one period earns additional interest during each subsequent time period.
The process of adding earned interest to the principal so that the interest is figured on a progressively larger amount. Paying interest on interest.
The arithmetical process of determining the final value of an investment or series of investments when compound interest is applied ie. when interest is earned on the interest as well as on the initial principal. Investment returns are typically compounded, so two consecutive periods of 10% returns results in a compound return of 21%. (See also Annualising).
Additional interest accrued if profits from investments are reinvested.
If you leave the money you earn in your investment, it in return will earn more money. That's because interest will be paid on the principal as well as the interest that has already been earned thus far.
A process whereby the value of an investment increases exponentially over time due to compound interest. see also Rule of 72.
Calculation of the future value of a present sum by application of the relevant rate of interest. It is given by
Interest paid on interest, resulting in a geometric rate of increase on the initial principal. For example, a $100 investment that earns 5% generates $5 per year. With compounding, it would generate $5 the first year, making a new basis of $105; then $5.25 the next year, for a basis of $110.25; $5.51 the next year; and so on. Reinvesting dividends and capital gains takes advantage of the power of compounding.
The process through which the value of an investment increases exponentially over time as interest or dividends are reinvested, so that additional interest or dividends are always paid based on the value of the initial investment plus the accumulated interest or dividends already received.
Interest added to interest previously earned on a principal balance. The more frequently interest is compounded, the higher the effective yield.
A geometric process in which interest is paid not only on principal but also on any interest the principal has earned.
Dividends paid on both the principal balance and the accumulated dividends.
Happens when interest is paid on an investment and becomes part of the principal, on which further interest is paid at a later date .
Occurs when earnings from an investment are added back into the investment and used to generate further earnings. For example, on bank accounts that pay interest, the interest is typically added to the balance of the account each day, which means that the next day's interest is calculated on a slightly higher amount. Likewise, if you leave your money in a mutual fund, rather than periodically withdrawing earnings on it, it will grow significantly faster. Compounding is the key to the success of long-term investments.
When interest earned each year is left in the account and becomes part of the principal on which interest is earned in subsequent years.
The multiplying effect upon the growth of an investment that comes from reinvesting all dividends and capital gains distributions and leaving the principle untouched.
When interest is earned on both the principal amount and any interest already earned. Because of compound interest, money grows much faster if the income from an investment is left in the account.
A process where the income your investment earns is reinvested and in turn generates earnings.
The increase in wealth that results from reinvestment — think of it as earning income on your income. For example, if you invested $1,000 in a savings account with 5% interest compounded annually, at the end of the year you would have $1050. If you kept the $50 in the account along with the original $1,000 for another year, 5% interest would then be earned on the $1050 total. This would produce an amount of $1102.00. To see for yourself the power of compounding, check out this investment calculator from the Bank of Canada.
This is the concept that one earns interest on the interest he have already earned. At first, your money grows slowly, but as time passes, your money grows more rapidly. This is often considered the "eighth wonder of the world". F.E.: You deposit $400 to the program with 5% interest and 25% compounding. When you receive you payment 25% will be added to your deposit and 75% you'll receive to your account. So you'll receive (5%*$400)*75%=$15 and your deposit will become $400+(5%*$400)*25%=$405
The process of accruing interest on the remaining balance on a monthly basis.
The addition of interest on an investment to the principal each month or year so that interest is earned on interest during the succeeding period.
The effect of continual reinvestment of compound interest (See "compound interest" and "reinvestment").
The payment, through interest, based on the sum of the original principal amount and its accrued interest.
The process of adding interest earned to principal
The continuous reinvestment of income with the effect that any asset would be based on the original investment and the reinvested income.
The effect of interest being earned on previously earned interest.
The paying of interest on the accrued interest and principal
This is the exponential growth effect of an investment held over time with reinvested gains and interest. Frequently defined as the ability to generate returns on both the principal and on the accrued returns. Compounding is a cornerstone of a long term trading investment system.
A process that works for you when the money you invest earns more money and those earnings, in turn, are also invested and earn money. (Earnings however, may be positive or negative).
The process by which your investment grows in value over time with reinvested interest* or dividends*.
A type of interest that is applied to both the starting amount and the amount of interest that has been applied. Since compounding interest applies to the amount and the interest, interest payments to unpaid debt will grow over time.
When you deposit money in the bank, it earns interest. When that interest also begins to earn interest, the result is compounded interest. Compounding also occurs if income from bonds or dividends and capital gains from stocks or mutual funds are reinvested.
The ability of an asset to generate earnings that are then reinvested and generate their own earnings (earnings on earnings).
Interest earned on interest previously earned and reinvested. For example, if a security paid a fixed interest rate of 10% annually and an investor invested $500, by the end of the first year the investor would have earned $50 in interest. If that interest was reinvested, the investor would enter the second year with $550 invested. At the end of the second year, the investor would have earned $55 in interest -- earning an extra $5 in interest thanks to the reinvestment of the first year's interest.
To compute (interest) on the principal and accrued interest. Compounding is an option which you can increase your principal. If you choose 100% compounding rate, for instance, all your daily profit will be added to the principal. This way, on the following day, interest will be calculated on the principal + the amount of the previous profit payout.
An investment strategy that combines the power of time with accumulating earnings to potentially increase an investor's portfolio value. Each time the investments generate earnings, those earnings are added to the original principal. This new principal balance, in turn, generates additional earnings that are again reinvested.
The payment of interest on interest. Compounding is the process of accumulating intereston the amount borrowed when the interest is paid(credited) more frequently then annually. If a loan is due in one year and compounding is annual, compounding will not occur. However, if a loan is due in one year and the compounding is monthly, then at the end of the first month the interest for one month will be added to the principal of the loan and thisamount (principal and interest) will be the amount on which interest will be calculated at the end of the second period.
A type of calculation in which interest earned is reinvested and earns additional interest.
Earnings on an investment's gains which, over time, can produce significant growth in the value of an investment. For example, if your investments earn 10% a year for five years, you earn 61.1%, not 50%. That's because, as time goes on, you make money not only on your original investment, but also on your accumulated gains from previous years.
The increase in value of an investment resulting from the combination of the principal earning interest and that interest earning more interest.
The paying of interest on the accrued interest as well as on the principal
An important investment principle, this is the process of earning income on income already earned.
When money you save or invest earns interest and that interest is added to your savings or investment and begins earning interest as well.
The process of earning interest on interest. Interest earned is reinvested and becomes part of the principal, which in turn earns more interest. In effect, income earns income.
The computation of interest paid using the principal plus the previously earned interest.
Indicates the frequency with which interest is computed and added to the principal to arrive at a new actual balance. The essential point to remember if you are a borrower is, the less frequent the compounding, the better deal for you. If you are a lender (or saver at the bank) the more often the frequency of compounding, the more you will get in return. In Canada, lenders generally compound mortgages semi-annually.
Earnings on an investment's earnings. Over time, compounding can produce significant growth in the value of an investment.
When an investment generates earnings on reinvested earnings.
A process by which investment earnings build up not only on the money originally invested but also on the earnings and gains made in previous years.
When interest is earned on past interest this is called compounding. For instance, if there is 5% on $100 for a year, then the next year the interest will be not only on the $100 but on the 5 dollars of interest earned.
Earning interest on principal saved and on previously earned interest.
Financial advisers love to talk about the magic of compounding. What magic? If your investments make 10% a year for five years, you earn not 50% but 61.1%. Here's the reason: As time goes on, you make money not only on your original investment but also on your accumulated gains from earlier years.
payment of earnings on not only the principal sum invested, but also on the earnings already realized or accumulated
The process by which income is earned on income that has previously been earned. The end value of the investment includes both the original amount invested and the reinvested income.
Interest, dividends or capital gains accrued on both an original investment and its reinvested earnings. When earnings are reinvested, you buy additional shares, which, in turn purchase even more shares.
Paying interest on the total asset value, including interest earned previously. Continual reinvestment of income adds to the amount of capital on which interest is paid. The effects of compounding vary greatly with frequency: lower interest compounded frequently may offer more total return than higher interest compounded infrequently.
The growth of an investment that comes from earnings on both the original principal amount invested and the reinvested income and capital gains.
A process whereby the value of an investment appreciates exponentially over time as interest is earned on interest.
The process of applying investment growth not only to the original investment, but also to income and gains reinvested in prior periods.
Incremental interest earned on a deposit or asset which periodically becomes part of the interest bearing principal.
The arithmetic process of determining the final value or series of payments when compound interest is applied.
Refers to earning income on your income. For example, on fixed income investments that pay interest over time at periodic intervals, compounding means making interest on your initial investment and also on the interest as it builds up (i.e., earning interest on your interest).
A process whereby the value of an investment increases exponentially over time due to compound interest. Compound interest is calculated not only on the initial principal, but also on the accumulated interest of prior periods.
The ability of an asset to generate earnings that are then reinvested and generate their own earnings. Making interest on interest, the power of compounding interest is truly magical. At 15% interest for 25 years, $10,000 would grow to $330,000
Earnings on your investment's earnings. For example, if you've invested $1,000 earning 5 percent a year, after one year, you will have $1,050. During the second year, you will earn interest not only on the original $1,000, but also on the $50 in earnings. Over time, compounding can lead to growth in your investment.