The amount which you will receive at the end of the investment term depends on the frequency of compounding. While investing, you should always look for how often the interest is compounded. There are various options available where the compound interest is accrued daily, monthly, and yearly basis. These are nothing but the frequency of compounding.
Let’s understand this with a simple example. Consider you invested Rs. 1,00,000 for 5 years. You have three options where the rate of return is 10%, which is accrued on a daily, monthly and annual basis. So, you will end up with Rs.1,64,000 if the compounding is done on monthly basis, Rs.1,62,889 if it is done semi-annually, and Rs.1,61,051 if it is done on annual basis.