Compound Interest Calculator
Compound interest is the mechanism by which returns generate further returns, creating exponential growth over time. Albert Einstein reportedly called it 'the eighth wonder of the world': those who understand it earn it, those who don't pay it. For a long-term investor, time is the most important variable — more so than starting capital or annual return. Use the calculator below to visualize the power of time on your portfolio.
Key takeaways
- ▸Compound interest: returns are reinvested to generate further returns, creating exponential growth
- ▸Time matters more than capital: starting 10 years earlier is worth more than doubling your contributions
- ▸Rule of 72: divide 72 by the annual return to find out how many years it takes to double your money (e.g. 7% → ~10 years)
- ▸Regular monthly contributions: even small monthly amounts build significant wealth over the long term
- ▸Inflation and taxes erode real returns: always assume a realistic net return of 5–7% per year for equity ETFs
Total invested
58.000 €
Total return
86.573 €
Final total
144.573 €
Multiplier
2.5x
How is compound interest calculated?
M = final amount · C = initial capital · r = annual return · t = years · v = monthly contribution
The calculation works year by year: each year your portfolio grows by the selected return rate, and new contributions are added to the already-appreciated total. This creates a snowball effect: in the early years growth seems slow, but after year 15–20 the acceleration becomes clearly visible in the chart.
The calculator uses annual compounding with monthly contributions. For ETFs and index funds, a historical gross return of 7% per year is a common benchmark for global equity indices like MSCI World. After costs and taxes, a realistic net return of 5–6% is a reasonable assumption for long-term projections.
A concrete example: £10,000 + £300/month for 25 years
With an initial capital of €10,000, monthly contributions of €300 (€3,600/year) and an annual return of 7%, after 25 years you would have invested around €100,000 out of pocket — but your portfolio would be worth about €230,000. Nearly twice what you put in, thanks to returns being reinvested year after year. The difference between €100,000 contributed and €230,000 final value — roughly €130,000 — is compound interest at work.
Frequently asked questions
What is a realistic annual return for an equity ETF?
Global equity indices like MSCI World have historically returned between 7% and 10% gross per year over the last two decades. After inflation and taxes (typically 25–30% on gains depending on your country), a realistic net real return of 4–6% is a conservative estimate for long-term projections.
How often does interest compound in an ETF?
In accumulating ETFs, dividends are automatically reinvested — which is equivalent to continuous compounding. The calculator uses annual compounding, which is a good approximation for multi-year investment horizons.
Does inflation reduce the real value of my portfolio?
Yes. With 2% inflation, €100,000 in 20 years will have the purchasing power of about €67,000 today. Use the Inflation Calculator to see exactly how much inflation erodes your capital.
Is it better to invest a lump sum or make regular contributions?
It depends on your time horizon and liquidity. A lump sum benefits from more years of compounding, but regular contributions (dollar-cost averaging) reduce the risk of entering at the wrong time and are more sustainable for most investors.
At what age should I start investing?
The sooner the better. Starting at 25 instead of 35 can be worth hundreds of thousands of euros more at retirement, even with identical contributions. The one thing you can never get back in investing is time.
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