Why Investors are Interested in Daily Compounded Interest

Collecting interest is an easy way to earn money. All you do is let a financial institution pay you for investing in an interest-bearing account. To get the best return, investors want accounts that have a high interest rate and yield, and accounts with rates and yields that increase as deposits and balances increase. But interest rate and account balance aren’t the only things affecting earnings.

How often interest is paid and the portion of the balance on which it’s paid matter, too. When interest for the total balance is calculated and added to the balance daily, the investor earns what’s known as “daily compounded interest”. 

Calculating Compounded Interest

Compounded interest can be earned and/or paid at different intervals for the total value of an account (original deposit, subsequent deposits, and interest payments). If an account earns annual compounded interest, interest compounds once a year. If it earns quarterly compounded interest, interest compounds every three months. Daily compounded interest means interest compounds daily. 

Let’s say you move $10,000 to an IRA money market account on January 1, and the annual rate is 0.35%. At the end of the first day, you earn .0009% of the total deposit, which is added to the balance and generates a higher daily earning when interest is calculated on January 2, and so on. If deposits are made, earnings go higher.

Compounded Interest and Investors 

Investments that pay compounded interest at frequent intervals offer a great chance to accumulate an exponential amount of total returns. 

That’s why many open the accounts in young adulthood and middle age, let the interest compound until they retire, then use the money to balance a reduced retirement income. Others start using the accounts right when they mature to accomplish goals before retirement.

As Dividend.com explains, “It doesn’t matter if you are just putting some money into short-term, low-rate savings accounts or CDs or long-term, higher return investments, compound interest will work for your benefit if you allow it.” Do it if you can, but you don’t have to invest big upfront to get a good return.  

Short-term savings, long-term certificates, IRAs, and money market accounts all play a role for investors, all earning interest.  Once you’ve established review account types, compounding frequency, and rates, and are ready to choose an account to fit your goals, the simplest way to evaluate interest earnings among them is with the APY (annual percentage yield).  It’s easy to find and easy to compare!

Looking for a flexible and secure way to save? 

If you’re interested in accounts that compound interest daily, our team of professionals is here to share with you our Money Market Account. You’ll earn higher interest rates as your balance grows and interest is compounded DAILY on balances of $1,000 or more. Click for complete details or give us a call at (800) 325-9905 today, or email us through our contact form. We here to answer your questions and lend you a hand with your savings and investment plans!

 


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