Only the fixed investment of the fund is calculated according to compound interest.

The fixed investment of the fund itself has no compound interest. Fixed investment funds will only have compound interest effect if they distribute income and choose dividend reinvestment, just like bank deposits, which deposit 1 1,000 yuan every month, and the interest is always calculated according to simple interest. Only when the interest is taken out and deposited in the bank can the interest be calculated and the compound interest effect be produced. At the same time, after the dividend is reinvested, if the fund gains, it will gain more, and if the fund loses, it will also suffer greater losses, which is different from the compound interest calculation of bank deposits.

Compound interest means that after each interest period, the interest generated will be added to the principal to calculate the interest of the next period. In this way, in each interest-bearing period, the interest of the previous interest-bearing period will become the interest-bearing principal, that is, interest will accrue at interest, which is also commonly known as "rolling interest".

Compound interest mainly comes from the following aspects:

1, buy low and sell high, and buy low and sell high is the easiest compound interest to understand. Buy index funds when the valuation is low, and then sell them when the valuation rises.

Dividend reinvestment if we don't plan to buy and sell frequently.

Extended data:

Automatic investment planning (AIP) is known as lazy financial management, and its value stems from a saying circulating on Wall Street: "It is more difficult to step into the market accurately than to catch a flying knife in the air." If you adopt the method of buying in batches, you will overcome the defects of buying and selling at one time, balance the cost and make yourself invincible in investment, that is, the fixed investment method.

Generally speaking, there are two ways of fund investment, single investment and regular quota. Because of the low starting point and simple method, the fund is also called "small investment plan" or "lazy financial management"

References:

Fund Fixed Investment _ Baidu Encyclopedia