<prompt> Human: My apologies in advance for the stupid question. Im at the point where I know just enough to piece together all sorts of incompletefalse information to make a fool of myself. I know that unlike a normal saving account, the money in an IRA does not make interest by just sitting there. I have to use the said money to buy mutual funds or ETF. I also know that the price of each share of ETFMF goes up and down just like that of normal stocks know to average Joes.Lets say I contributed 5500 to my Roth IRA, and used that money to buy exactly 11 shares of Targeted Date Fund X at 500share. Over the next year, the price of TDF X fluctuated a little, but overall grew to 550share on 12172017. My assets are now worth 6050, but I still only have 11 shares. My question is, howwherewhen exactly does compounding interest occur? Even if I cash out when each share of TDF X is worth 5000, essentially increased my cash by ten-fold, at the end of the day I would have 11however much each share is worth. What am I missing?Edit: alright looks like I was focusing on the number of shares instead of the actual monetary value of my assets.Thanks guys!  <response>: Technically its not compound interest, because the growth doesnt come from interest payments, but the effect is the same. If you reinvest dividends, you will end up with more shares, but the number of shares isnt really relevant. Shares are just an arbitrary unit. You dont care how many shares you own, you care how much theyre worth. Its effectively the same as compound interest because the growth is based on the total amount you have at the time, not the amount you started with. If you invest 1000 and get 5 growth per year, you dont gain 50 every year, you get 50 the first year, 52.50 the second year, 55.13 the third, 57.88, 60.77, etc. 