9 Compound Interest Investments You Need to Consider

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As they always say: Save as early as possible and take advantage of compound interest. Albert Einstein even once said “Compound interest is the eighth wonder of the world.”

Compound interest is the interest on savings calculated on both the initial principal and the accumulated interest from previous periods. It allows money to grow exponentially over time!

But... where do you start? Here's a list of investment ideas to grow your money.

Compound Interest Investments and Accounts

1. High Yield Savings Account

A high-yield savings account (aka HYSA) gives you a much higher interest rate than your regular savings accounts. I opened my first bank account when I was in senior high school. It does earn interest, but it isn't a high-yield one. It's one of my regrets now that I'm in my 20s.

It's not over for me, though! I found a great digital bank where I can open a high yield savings account. I highly recommend the Maya app if you're from the Philippines. Sign up using my invite code JX6YEMPJ2J31 or click the link here. Receive your Php 50 reward after you sign up, upgrade your account, and complete your first Maya transaction worth at least Php 20!

And if you're not from the Philippines, I'm sure there are tons of digital banks in your country offering attractive HYSA. Good luck!

Disclaimer: Not Sponsored

2. Dividend Stocks

Dividend stocks offer passive income to shareholders in the form of dividends when the companies distribute their profits. They are typically paid every quarter – depending on how the company itself performs.

So, it will all really depend on whether the company you invested in is performing well. This is how Warren Buffet remains one of the richest people in the world.

Investing in stocks allows you to beat inflation, instead of just letting your money sleep in a savings account. If you wanna get started on investing in dividend stocks, try Investagrams! Investagrams is an online platform for learning public market investing. It offers a virtual trading platform based on real-time stock market prices where users can buy and sell securities and compete against other users.

One time, our professor tasked us to buy and sell stocks via the virtual trading platform. Spoiler alert: I earned dividends (virtually)! The virtual trading platform is a great practice if you are afraid to invest your money outright.

3. Growth Stocks

Growth stocks are shares of companies that are still in their early stages of development. These are riskier investments but have strong prospects for future profit.

Growth stocks – like the name says – have A LOT of growth potential…

But then... you could also lose more. Because, unlike dividend stocks, growth stocks do not have a lot of stability and maturity yet.

Examples include startups, tech companies, and software companies.

4. Bonds

Bonds are typically issued to investors to raise funds for projects, private companies, and governments. Some examples are treasury bonds, municipal bonds, and corporate bonds. Bonds are typically the most conservative investment you can make – aside from cash.

5. Mutual Funds

A mutual fund refers to a professionally managed pool of money from many different investors to buy assets like stocks, bonds, and commodities. They are typically good compound interest investment instruments for beginners.

6. Precious Metals

Gold, silver, and platinum? Maybe you like jewelry. Or maybe you're interested in collecting them. We all know they are precious for a reason.

Each precious metal type performs differently, depending on market conditions. Historically, silver proved to be the top-performing precious metal. It also helps beat inflation, since these valuable stones aren't as impacted by the market.

7. Private REITs

Want to earn higher? Invest in real estate. A REIT (aka real estate investment trust) is a company that owns and manages several properties to produce passive income for its investors.

I first heard about it when I worked for a conglomerate here in the Philippines as an intern. I was shook when I heard how much they are earning. Not thousands. Not millions. They're earning billions!

Here's the news if you're wondering: FILINVEST REIT Corp. (FILRT) earns P1.3B on rentals

8. Health Savings Account

The COVID-19 pandemic attacked us simultaneously: health and finances. Many got affected by the coronavirus, allowing us to be more health conscious than ever. Many lost their jobs and the economy closed down. So being insured while growing your money just sounds perfect. We never know what might happen to us.

Get covered in bad times, Get rewarded in good times. It's a win-win! A health savings account (aka HSA) is an investment account where you can set money aside, invest it, and use it for qualified medical expenses.

9. Retirement Account

The earlier you start investing in your own retirement, the earlier you can become financially independent. I'm a graduating student, and I am looking to open an account in PERA Retirement Savings once I get employed.

Some Asian countries need to power up their retirement game. In the Philippines, most older people plan—or are forced—to rely on their children for support. It's great if the said son or daughter voluntarily gives back, but they have their own lives to live and their own families to feed, too. It's just not sustainable.

With the high inflation and wage stagnation, it’s more important than ever to start saving for retirement. The best tool here is time, and the earlier you start, the more you can take advantage of compound interest.

That's a wrap! Now you have options.

The next thing to do? Research. Identify whatever is right for you. Familiarize yourself with the jargons and keep up with economic trends. Try to talk with financial advisors and fellow investors. Although, keep in mind that at the end of the day, it's your money. You take the shots. Get guided but don't be naive.

And once you find the right one for you, resist the urge to withdraw your money and stay invested. The key to getting rich from compound interest comes down to one thing: Time. That’s why you need to invest consistently when you are in your 20s! Start as early as you can and protect your hard-earned wealth :)