How Do Compound Interest Investments Work?

Photo Courtesy: FatCamera/E+/Getty Images

If you've heard the term "compound interest" before, you most likely heard it in the context of certain types of loans or credit card interest. And it's a common concept to run across when you're dealing with these types of financial products — but did you know it can also apply to investments you make? 

It can be tempting to think of compound interest in a less-than-favorable light. After all, when it applies to loans and credit cards, it's referencing the extra money that you'll owe when repaying those debts. But you might be pleasantly surprised to find out that compound interest can be something you definitely want — it can work to your advantage when it comes to the investments you make. To understand how compound interest can work in your favor, take a deeper look at what it is and how it can influence your investing decisions.

ADVERTISEMENT