I may be missing or misunderstanding something regarding how compound interest works with mutual funds and ETFs.
Let's say I have $10,000, and I invest said monies in mutual fund XXXXX at $100/share, effectively giving me 100 shares. Now, let's assume at the end of the year I have a 5% return. My $10,000 is now $10,500.
At what point does my investment benefit from compounded interest? Monthly? Quarter? Yearly? Does it even benefit?
I'd love a clear cut example that brings in market fluctuations YOY (let's say my investment loses money the following year).
I may not even be asking the right question - I'm very new to this stuff and am trying to understand how a long-term play into purchasing diversified mutual funds grows over time and how compounded interest affects my invested balance.
I haven't found an explanation or calculator that I can wrap my head around.
Thank you for any and all assistance. I will continue searching the web while I wait for a reply.
EDIT I think this post cleared it up for me a bit.
It's the reinvestment of the dividends that are paid out from the fund that grows my investment - the dividend is the compounded part. Right?