Compound Interest and Your Return

How interest is calculated can greatly affect your savings. The more often interest is compounded (added to your account), the more you earn.

This calculator demonstrates how compounding can affect your savings and how interest on interest really adds up! Click the "View Report" button for a detailed look at the results.

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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 dependant on the type of investments you select. From January 1970 to December 2003, the average compounded rate of return for the S&P 500, including reinvestment of dividends, was approximately 11.7% per year. During this period, the highest 12-month return was 64%, and the lowest was -39%. Savings accounts at a bank pay as little as 1% or less. 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 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.
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.

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