Compounding Frequency

Compounding frequency refers to how often interest is calculated and added to an investment or loan within a given period, typically a year. Common frequencies include annually, semi-annually, quarterly, monthly, or daily. The more frequently interest is compounded, the faster your money grows because interest earns interest more often. For example, monthly compounding adds interest 12 times a year, while daily compounding does so 365 times. Understanding compounding frequency helps you evaluate how quickly your investment will grow or how interest accrues on a loan over time.