Wednesday, July 13, 2011

My broker does not allow compounding?

Compounding is not something a broker allows or disallows but a matter of what investments you are making within the account. If the gains are from a bond, it isn't compounding, if it's from preferred shares or dividend paying stock, it's not compounding, if it's from a dividend reinvestment program, it's compounding if it's in capital gains, it's compounding. You want it to compound, you reinvest it and putting money in an account with a broker isn't investing, that simply means you can invest within that account. So what made you that 25%? Just putting $1,000 to open an account isn't investing in anything, you still have to buy stocks, bonds or funds with that $1,000and what make it compound is you reinvesting the gains made. Also 25% a month amounts to 1,355% per year and you are most assuredly not getting that much of a gain. Perhaps what you're doing wrong is math, let alone investing.

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