How does compound interest work?

Updated May 2022

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Hi G P, you don't necessarily have to reinvest your dividends in order to have compound interest. Essentially, compound interest refers to the fact that ETF is expected to grow by a certain percentage every year (e.g. 10%).

Hence, in the following years:

0th year: 100% baseline

1st year: 110% (+10%)

2nd year: 121% (+11% or 1.1x)

3rd year: 133.1% (+12.1% or 1.1x)

...

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Thus, the percentage growth rate of your portfolio increases every year.

If you are new to investing, I would recommend checking out the following books to learn more about Value Investing before you make a decision to invest your hard-earned money. Book Depository ships books at affordable pricing to Singapore too so I personally use it to get my US investment books, and I hope this helps you.

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Intelligent Investor

Common Stocks and Uncommon Profits

One Up On Wall Street

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If you are interested in getting a boost to your portfolio beyond the low STI dividend yield, can consider the on-going sign-up offers for Moomoo/Tiger Brokers.

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I got more than $300 in a week, which is 6.6% yield on my deposits. That's more than the dividend yield paid out across all my SGX shares! If you are interested in jumping on the bandwagon to get the rewards, do check out the links below :)

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Moomoo ($40 cash coupon + potentially Tesla Share: up to $1300 with $2700 deposit)

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Tiger (1 Free Grab Share + $5 cash coupon + potentially Tesla Share: up to $1270 with $2000 deposit)

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(Update: With the Student promotion for Moomoo, you only need to deposit $1000 instead of $2700 to get your $240 reward!)

I've been seeing a lot of buzz in compound interest. But how exactly and what plans are they? Where do I start looking to invest to have compound interest, and what would be a good amount to reach a million if I start at 28 yo?