<prompt> Human: This might sound like a dumb question, but how does an investment into the stock marketsp 500 for example give compound interest? Say I buy 10 shares, for 200 dollars a share, thats 2000. If the stock price raises 10 in a year, I now have 2200 dollars. That is a 10 interest rate, but I still only have 10 shares. Therefore, future returns will only be on those 10 shares, despite gaining 200 year one. It seems like dividend reinvestment doesnt quite matter too much in this, as dividends dont give as much as a yearly gain in stock price.  <response>: The concept of compounding is just how money works. Say I buy 10 shares, for 200 dollars a share, thats 2000. If the stock price raises 10 in a year, I now have 2200 dollars.And if it raises 10 again next year? Do you have 2400 or 2420 ? If you answer the latter, thats compounding.The effect is most amplified when you also reinvest dividends, in a tax-advantaged account. 