How does the Contract Compounding feature work?

Some contracts will include a customizable Compounding feature designed to enhance your investment experience. If your contract offers this option, you can specify the range and limits within which the Compounding will operate. This allows you to tailor the terms to fit your financial objectives and maximize your potential returns.

Here’s a simplified explanation:

Compounding Basics

When you invest money into a Contract, you may choose how much interest you want to reinvest (compound) versus how much you want to take out:

• 0% Compounding: You don’t reinvest any interest. You just earn profit like Contract title specified.

• 100% Compounding: You reinvest all interest, receiving it at the end of your investment period. You may or may not get your initial investment back, depending on the Contract terms.

Let's say you deposit 100 USD and earn 3% interest daily for 4 days without getting back your initial deposit at the end.

0% Compounding:

After 4 days, you earn a total of 112 USD. Your profit is 12 USD (3 USD per day).

60% Compounding:

You reinvest 60% of your interest and take out 40%.

Here’s how it breaks down over 4 days:

Day 1:

• Earned: 3 USD

• Added to deposit: 1.8 USD (60% of 3)

• Taken out: 1.2 USD (40% of 3)

• New deposit total: 101.8 USD

Day 2:

• Earned: 3.05 USD (3% of 101.8)

• Added to deposit: 1.83 USD

• Taken out: 1.22 USD

• New deposit total: 103.63 USD

Day 3:

• Earned: 3.11 USD (3% of 103.63)

• Added to deposit: 1.87 USD

• Taken out: 1.24 USD

• New deposit total: 105.5 USD

Day 4:

• Earned: 3.17 USD (3% of 105.5)

• Added to deposit: 1.90 USD

• Taken out: 1.27 USD

• New deposit total: 107.4 USD

At the end of the 4 days with 60% compounding, your total deposit is 107.4 USD and your total taken out is 5.73 USD (1.2 + 1.22 + 1.24 + 1.27).

By the end of 4 days, the deposit has grown significantly because you chose to reinvest some of the interest, thus taking advantage of compounding!