Compound interest calculator
Compound interest means yesterday’s interest earns interest today. Put in a starting sum, a monthly rate, a horizon and a return, and you see how much of the end result you paid in yourself.
Compound interest
- Final value
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- You paid in
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- Earned on top
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How to use it
Four fields and nothing else. Starting capital is whatever is already invested and may be zero. The monthly rate is booked at the end of each month and earns interest from the month after. The return is a yearly figure compounded monthly, the way banks and brokers run a savings plan.
An example
Lena starts with 5,000 euro and puts away 250 euro a month. After 20 years at 6 percent she holds roughly 132,000 euro. She paid in 65,000 of that, so the interest made the other 67,000. From about year 11 the portfolio earns more in a year than she pays into it.
What the result leaves out
A fixed return is an average, not a promise. Real markets deliver the same average in an uneven order, and the order matters most near the end. Inflation, tax and broker fees are not in the number.
Questions people ask
Every month. The savings rate lands at the end of the month and earns interest from the following one. Paying in at the start of the month buys you one extra month of interest per rate and lands slightly higher.
For a broad equity ETF most people work with 6 to 7 percent before inflation. That is the long run average of the big world indices and it says nothing about the next ten years.
No, the figure is gross. Whatever your country charges on investment gains comes off the part that is not your own money, so look at the earned line rather than the final value.