With compound returns, it’s less about how much you can afford to invest and more about how long the investment has time to grow. The basic concept of returns on returns is simple. And the effect on a stocks and shares ISA or pension can be powerful. With our compound returns calculator, we’ll give you an estimate of the benefit.
Your results at the end of the timeframe
Total additional contributions
As with all investing, your capital is at risk. This calculator is not a reliable indicator of future performance and is intended as an aid to decision-making, not a guarantee.
Capital at risk. ISA rules apply
In the first year of investing, you may generate returns on your initial investment, while in the second year, you invest the capital (your initial investment) plus the returns to generate further returns on the total. Reinvesting any returns on your returns means your money can enjoy exponential growth. Of course, investing is subject to market ups and downs, and there’s a risk you’ll lose some of the money you’ve put in. However, by investing over a long timeframe, you give your investment time to make up for any losses.
For example, £100 invested with an expected return of 10% will generate £10 in the first year, £11 the second year and £12.1 the third year. The initial £100 will always generate a return of £10, but starting from the second year, you will generate an extra £1 from your past gains, and an extra £2.1 the third year. Hence, returns on returns.
Because financial institutions have different compounding rate frequencies - daily, monthly, yearly – we’ve given you the option to choose your own. Your total returns depend on your return rate period and timeframe, so again we’ve given you the option to change those fields. Your results are based on the assumption that any returns, including dividends, are reinvested and any monthly contributions are maintained.
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