Dollar Cost Averaging & Compound Interest Calculator

Compound Interest Calculator: Master the Power of Compounding

What is Compound Interest?

Compound interest is interest calculated on both the initial principal and the accumulated interest from previous periods. Often called 'interest on interest,' it causes wealth to grow exponentially over time. Albert Einstein reportedly called it 'the eighth wonder of the world' because those who understand it earn it, and those who don't pay it.

The Compound Interest Formula

A = P(1 + r/n)^(nt)

Where: A = final amount, P = principal (initial investment), r = annual interest rate (decimal), n = number of times interest compounds per year, t = time in years. This formula shows how money grows when earnings are reinvested.

How the Calculator Works

Our compound interest calculator helps you project investment growth with various scenarios:

• Initial Investment (Principal)

  The starting amount you invest. Can be any amount from savings, inheritance, or lump sum.

• Regular Contributions

  Optional periodic deposits (monthly, quarterly, annually) that increase your principal over time

• Interest Rate

  Expected annual return rate. Stock market historically averages 7-10%, bonds 3-5%, savings accounts 0.5-2%

• Compounding Frequency

  How often interest is calculated and added: daily, monthly, quarterly, or annually. More frequent compounding = faster growth

Impact of Compounding Frequency

Compounding frequency significantly affects returns. For a $10,000 investment at 5% annual rate over 10 years:

• Annual compounding (n=1): $16,288.95
• Quarterly compounding (n=4): $16,436.19
• Monthly compounding (n=12): $16,470.09
• Daily compounding (n=365): $16,486.65

Investment Tips for Maximum Compound Growth

• Start Early

  Time is your greatest asset. Starting 10 years earlier can double or triple your final amount even with smaller contributions.

• Invest Consistently

  Regular contributions (dollar-cost averaging) smooth out market volatility and build wealth systematically.

• Reinvest Dividends

  Always reinvest dividends and interest to maximize compounding effect. Don't withdraw earnings during accumulation phase.

• Minimize Fees

  Even 1% in annual fees can cost hundreds of thousands over decades. Choose low-cost index funds and avoid high-fee products.