Compound Interest Calculator
Compound interest allows your principal to grow exponentially by reinvesting earned returns. Calculate future balances, total interest accumulated, and growth breakdowns with regular deposits.
Sensitivity Analysis
Evaluate how variations in key operational drivers impact Future Portfolio Balance.
| Sensitivity Case | Assumption Shift | Driver Value | Future Portfolio Balance | Impact vs Base |
|---|
Formula & Methodology
Future Value = Principal * (1 + r/n)^(n*t) + PMT * [((1 + r/n)^(n*t) - 1) / (r/n)]PStarting investment amount.
rExpected annualized interest or return percentage.
tDuration of compounding in years.
PMTRegular monthly contribution invested.
Practical Worked Example
An investor deposits Rs 1,00,000 initial principal and contributes Rs 10,000 monthly for 15 years at an expected 12% annualized return.
Interpretation & Industry Benchmarks
Compound interest accelerates as time increases. The longer capital remains invested, the more the interest on interest dominates total returns.
Long horizon allows compounding to create the majority of accumulated wealth.
Moderate horizon where principal and growth contribute equally.
Short horizon or low return rate; principal constitutes most of the final balance.
Industry Nuance: For equity mutual funds and index portfolios, an 11-13% CAGR is a common benchmark, whereas fixed income delivers 6-8% in emerging markets like India.
Analytical Limitations
- Assumes a constant annualized return without accounting for annual market volatility.
- Does not deduct applicable capital gains taxes or fund management expense ratios.
Frequently Asked Questions
What frequency of compounding is used here?
The calculator compounds on a monthly basis matching regular monthly additions, aligning with standard mutual fund SIPs and bank recurring deposits.
How does inflation affect this figure?
Nominal future value does not account for inflation. To calculate purchasing power in today’s money, subtract the inflation rate (e.g. 5-6%) from the nominal return.