Which compounding frequency is best?

More frequent compounding = higher returns. Daily > Monthly > Quarterly > Yearly. Most mutual funds compound continuously through NAV updates.

How is compound interest different from simple interest?

Simple interest is calculated only on principal. Compound interest is calculated on principal + accumulated interest, so it grows exponentially.

Can compound interest work against me?

Yes — on debt like credit cards (36–42% annual) it wipes out wealth fast. Pay off high-interest debt before investing.

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Investing

Compound Interest Calculator

See compounding in action — adjust rate, time and contribution to visualize wealth growth.

Inputs

Initial principal

₹0₹1,00,000₹1,00,00,000

Monthly contribution

₹0₹5,000₹5,00,000

Annual rate

1%1030%

Tenure

yrs

1 yrs2050 yrs

Compounding

Results

Invested

₹13,00,000

Interest

₹32,61,292

Future value

₹45,61,292

What is compound interest?

Compound interest is interest earned on both the original principal and the accumulated interest from prior periods. Albert Einstein supposedly called it the eighth wonder of the world.

The more frequently interest compounds, the higher the effective annual yield. Monthly compounding beats annual; daily compounding beats monthly.

Compound interest formula

A = P × (1 + r/n)^(n × t)

A — Amount after t years
P — Principal
r — Annual rate (decimal)
n — Compounding periods per year
t — Time in years

Example: ₹1L at 10% for 30 years

Principal: ₹1,00,000
Rate: 10%
Tenure: 30 years
Compounding: Monthly
Future value: ₹19,85,374
Interest earned: ₹18,85,374

Without adding a rupee, ₹1L becomes ~₹20L over 30 years at 10%.

Frequently asked

Why compounding matters

1Time is the most powerful variable in compounding.
2Starting 10 years earlier can 2× your retirement corpus.
3Reinvesting dividends and interest accelerates growth.
4Small monthly contributions become large over decades.
5Helps you understand effective annual yield.

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