How does compounding work?
Each year's return is earned on the growing balance, not just the original sum, so growth accelerates over time. This is why long horizons matter so much for investing.
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Investment Return Impact Calculator
See how an annual return compounds a lump sum over time, and how changing the rate changes the result.
future value = principal × (1 + rate)^years
Frequently asked questions
Why does the rate matter so much over time?
Because compounding magnifies small differences. Over decades, a couple of extra percent a year can roughly double the final pot, which is why fees and rates get so much attention.
Is this guaranteed?
No. The calculator assumes a steady annual return, but real markets bounce around. It is a projection to understand compounding, not a promise of returns.
What about regular contributions?
This version compounds a single lump sum. Adding monthly contributions would grow it faster, which a dedicated SIP or savings calculator handles.
How do I compare this to inflation?
Run the inflation calculator at the same horizon. If your investment rate beats inflation, you are building real wealth; if not, you are losing purchasing power despite the bigger number.