Scenario presets
Investment Parameters
Portfolio Growth Results
Calculating growth...
- Future portfolio balance
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- Total principal deposited
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- Total compound interest earned
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- Effective Annual Rate (APY)
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- Real purchasing power (inflation-adjusted)
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- Doubling time (at this APY)
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Sensitivity Analysis 1: Return Rate vs. Monthly Contribution
Total portfolio future value ($) across market return swings and contribution budget adjustments.
| Rate \ Monthly Deposit | -40% | -20% | Base | +20% | +40% |
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Sensitivity Analysis 2: Horizon Duration vs. Return Rate
Total compound interest earned ($) isolating the power of compounding time against return rate.
| Horizon \ Rate | -2.0% | -1.0% | Base | +1.0% | +2.0% |
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Milestone Accumulation Schedule
| Milestone | Total Deposits | Interest Earned | Nominal Balance | Real Value |
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Formulas and worked example
- Future Value: FV = P × (1 + r/n)nt + PMT × [((1 + r/n)nt - 1) / (r/n)]
- Effective Annual Rate: APY = (1 + r/n)n - 1
- Real Value: FVreal = FV / (1 + π)t
- Doubling Time: tdouble = ln(2) / ln(1 + APY) ≈ 72 / (Annual Rate %)
An investor starts with $10,000 and adds $500 monthly for 30 years at an 8% nominal rate compounded monthly. Over 30 years, they contribute $190,000 in principal. The portfolio grows to $854,537, earning $664,537 in compound interest (77.8% of wealth). At 2.5% inflation, purchasing power equals $407,394 in today's dollars.
Self-check quiz
1. Over long holding periods (25+ years), the largest portion of a compound portfolio typically comes from:
2. Daily compounding versus annual compounding on the same nominal 8% rate will:
3. According to the Rule of 72, an investment growing at 9% annually doubles in approximately:
4. Inflation-adjusted real value measures:
Frequently asked questions
What is compound interest and how does it differ from simple interest?
Simple interest accrues only on the original principal invested. Compound interest accrues on both the initial principal and the accumulated interest from prior periods, accelerating wealth exponentially over time.
How does compounding frequency impact the Effective Annual Rate (APY)?
More frequent compounding periods (such as daily or monthly instead of annually) generate interest on interest sooner, yielding a higher Effective Annual Rate (APY) for the same nominal annual percentage rate.
Why does inflation matter when calculating long-term compound wealth?
Inflation reduces the future purchasing power of money. While nominal account balances may look large, the inflation-adjusted real value shows what those dollars will actually buy in today's goods and services.
What is the Rule of 72 and how accurate is it?
The Rule of 72 approximates the years required to double an investment by dividing 72 by the annual interest rate percentage. It is very close to exact doubling time for rates between 5 and 12 percent.