Which Stocks Earn Compound Interest?

Which Stocks Earn Compound Interest? 1

Stocks do not pay interest, a few of them pay dividends. A couple of two basic kinds of securities that you can invest in: stocks also known as equity, and bonds called set income also. Stocks can but do definitely not pay dividends and bonds more often than not pay interest. What is the difference?

When you get shares of stock, you own a part of the company that issued the stock. 10,000 would buy you 1% of this company. If the ongoing company is profitable, and even when it isn’t sometimes, it might choose to pay shareholders (you) a dividend. All shareholders of common stock get the same dividend for each talk about they own.

1,000 bonds in the same company, you would not own any of the ongoing company. 10,000 back on a particular day in the foreseeable future ( the maturity date). They consent to pay you interest on your cash up unti the maturity day. 250 every six months. Okay enough of the details and jargon. The point is, in neither case is your investment compounding. You will be the one that makes it compound, not the security, stock or bond, that you bought.

If you were to take the interest check from the relationship, and buy more bonds, THEN you would be compounding your interest. If you were to take the dividend bank checks from your business, and purchase more stock with it, You then would be compounding your investment. When you have a checking account that automatically puts the eye back into the account, and then pays interest on that interest, you are compounding your investment. When you set up a merchant account at Schwab or Fidelity you can guide them to reinvest all interest and dividends back to most mutual money, both stock and connection money.

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