What is a major benefit of using compound interest for investments?

Using compound interest for investments leads to exponential growth of funds over time, which is a significant advantage. This occurs because compound interest calculates interest on both the initial principal and the accumulated interest from previous periods. As a result, the investment grows at an increasing rate, creating a powerful effect over longer durations. The longer the investment is held, the more pronounced this growth becomes, allowing investors to benefit significantly from the time value of money.

The other options do not align with the fundamental nature of compound interest. For example, while it can enhance growth, it does not guarantee fixed returns, as investments are subject to market fluctuations. Similarly, while compound interest can enhance returns, it does not inherently minimize investment risks, which are influenced by external factors such as market volatility. Lastly, liquidity refers to how easily an asset can be converted into cash, which is not directly affected by the mechanism of compounding. Thus, option B accurately captures the essence of the benefits of compound interest in investments.