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What is Compound Interest?

Compound Interest

WHAT

Compound interest is when you earn interest on interest, by reinvesting the money you earned
from your initial investment.
Albert Einstein once said that the most powerful force in the universe is compound interest,
because of the amazing way it can turn small investments into large sums—given enough time
to grow.
Here’s how it works:
● First, you invest some money, such as in real estate.
● You earn a return on that investment.
● Then, you reinvest your initial investment, plus what you’ve earned.
● Because you’re investing more the second time, you can earn more.
● As you keep reinvesting and earning again, you keep earning a bigger return.

CHART

Over time, compound interest lets your money grow exponentially. That’s why investors often
talk about the magic of compounding.