Compound Interest and Your Return

How interest is calculated can greatly affect your savings. The more often interest is compounded, or added to your account, the more you earn. This compound interest calculator demonstrates how compounding can affect your savings, and how interest on your interest really adds up!

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Definitions

Investment Amount
The amount of your initial investment.

Interest Rate
The annual interest rate for your investment. The actual rate of return is largely dependent on the type of investments you select. From January 1970 to December 2008, the average annual compounded rate of return for the S&P 500, including reinvestment of dividends, was approximately 9.7% (source: www.standardandpoors.com). During this period, the highest 12-month return was 61%, from June 1982 through June 1983. The lowest 12-month return was -39%, which happened twice, once from September 1973 to September 1974 and again from November 2007 to November 2008. Savings accounts at a bank may pay as little as 1% or less but carry significantly lower risk of loss of principal balances.

It is important to remember that future rates of return can't be predicted with certainty and that investments that pay higher rates of return are generally subject to higher risk and volatility. The actual rate of return on investments can vary widely over time, especially for long-term investments. This includes the potential loss of principal on your investment. It is not possible to invest directly in an index and the compounded rate of return noted above does not reflect sales charges and other fees that funds and/or investment companies may charge.

Compound Interest
Interest on an investment's interest, plus previous interest. The more frequently this occurs, the sooner your accumulated interest will generate additional interest. You should check with your financial institution to find out how often interest is being compounded on your particular investment.

Years
Number of years for this investment.

Yearly APY
Annual percentage yield received if your investment is compounded yearly.

Quarterly APY
Annual percentage yield received if your investment is compounded quarterly.

Monthly APY
Annual percentage yield received if your investment is compounded monthly.

Daily APY
Annual percentage yield received if your investment is compounded daily.

Compound Interest Calculator – A Powerful Tool

If you want to watch your money grow rapidly, you must learn the magic of compound interest calculation.  Our compound interest calculator will show you how your savings will grow and on how the interest is calculated. Compounding interest means that interest will be added to your account more often, which will eventually help you make more money in a smaller period of time.

Know the Magic of Compounding Interest

This compound interest calculator will help you understand better the effects of compounding interest on your savings. All you have to do is to enter the interest rate that is applicable in your case, the sum of money you want to invest, and the period of investment. Once you click on the calculate button, you can get to know the future value that such an investment will produce for you. The calculator has been designed in a way to make compound interest calculation easier for you. Even if you are not very good at math, you can still use this calculator efficiently and develop your personal finance strategies based on the calculations. Always remember, if you are a serious investor, there is no substitute for knowing the effects of compounding.    

The compound interest calculation is the most powerful concept in personal finance. Compared to simple interest, the compound interest is calculated on the amount originally invested plus the interest built up during a certain period of time. The interest may get compounded on a weekly, monthly, or annual basis. The more often it is compounded, the faster your money grows.

Whether you are investing in real estate, in a bank, or any other financial venture, it is important for you to learn how compound interest calculation works. But, even if you know the formula, you will find it a time consuming task to calculate everything manually. This is where the Compound Interest calculator comes to the rescue. It makes the calculations easier for you.


Information and interactive calculators are made available to you as self-help tools for your independent use and are not intended to provide investment advice. We cannot and do not guarantee their applicability or accuracy in regards to your individual circumstances. All examples are hypothetical and are for illustrative purposes. We encourage you to seek personalized advice from qualified professionals regarding all personal finance issues.