![]() Interest can compound on any schedule based on the nature of your contract or the terms of your account. To find out how you can build an account like this, see our picks for the best brokerage accounts. This is the strength of compound interest - and how it can sometimes seem like magic. By year 25, your new balance on that $10,00 initial investment is $54,724.33. Now your account is growing by approximately $3,500 each year. Let’s look at what happens if you hold this investment even longer: While your interest rate remains the same (always 7%), the rate at which your balance grows accelerates. But by the fifteenth year of this account, it’s growing by $1,805 per year, more than 2.5 times its original rate of growth. The rate of change itself also increases over time.ĭuring the first few years of this account, you add $700 or so per year, so the growth you see is probably not that different from simple interest. ![]()
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