eToro Explain Compound Interest

eToro Explain Compound Interest

eToro has released a guide on their platform earlier today which helps traders get their heads around Compound Interest.

The guide asks specifically what it is and how it grows your money over time and so the clear aim from the post is to help traders to benefit from the common investment occurrence. However, it can be considered an investment strategy in its own right and can be used on a variety of trading options.

Your capital is at risk.

In terms of defining compound interest, eToro explains, “interest is the accumulation of interest over a previous period, based on the initial capital and all the deposits that were made over time. That results in reinvesting interest instead of withdrawing profits.”

The platform then provides the following formula which helps you calculate it, A = P(1+r/n)(nt). While that might sound a bit complicated, the platform breaks it down via the following;

  • A = the future value of the investment
  • P = the principal investment amount
  • r = the annual interest rate (as a decimal)
  • n = the number of times per year that interest is compounded per period
  • t = the number of periods the money is invested for

This might sound all a bit much to compute at the moment but fear not. The guide goes into more detail and provides examples to help you better understand how it works. Go to their platform now to learn more.

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