**What is Compound Interest?**

Basically compound interest is your

**initial principal + accumulated interest over the periods**.
In other words it is basically interest on interest.

So like I mentioned earlier on the questions my investor asked, I replied that when you opt for reinvestment you are already benefiting the value of compounding interest. I will show you the reason behind below :-

Let say you invested RM10,000 with the rate of return of 5% on a compounding interest basis.

Year 1 : RM 10,000 * 5% = RM 500 = RM 10,500

Year 2 : RM 10,500 * 5% = RM 525 =RM 11,025

Year 3 : RM 11,025 *5% = RM 551.25 =RM 11,576.25

**Therefore the total interest received = RM 1576.25**

( RM 500 + RM 525 + RM 551.25)

As compare to simple interest /

**without compound interest**:-
Year 1 : RM 10,000 * 5% = RM 500 = RM 10,500

Year 2 : RM 10,000 * 5% = RM 500 = RM 10,500

Year 3 : RM 10,000 * 5% = RM 500 = RM 10,500

**Total interest received = RM 1500**
As you can see , obviously with compounding interest it is more worth while if you understand the basis of Time Value of Money, which simply means that money available today is worth more than the future unless money itself an generate interest themselves. Hence, we are need to invest our money in different platform in order to make our money value more value in near future.

Therefore,

**the higher the number of compound periods the greater the compound interest value. Compounding interest also aids in boosting up the investment value over the long term periods.****PM me for more info on how to have a better returns for your financial goals.**

*charissim.ristyle@gmail.com*
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