Compound Interest Calculator

Simple interest is calculated only on the original principal, while compound interest is calculated on the principal plus accumulated interest. Over long periods, compound interest dramatically outperforms simple interest because each period interest is earned on a growing base.

The Rule of 72 is a quick mental formula to estimate how long your money takes to double. Divide 72 by your annual rate of return. For example, at 12% returns, your money doubles in approximately 6 years (72 ÷ 12 = 6).

Yes, especially for large amounts and long tenures. Daily compounding yields more than monthly, which yields more than annual. However, the difference narrows as frequency increases. For most investors, monthly compounding offers the best balance of practical return and simplicity.

Continuous compounding assumes interest is calculated and added an infinite number of times per year. It uses the formula A = P × e^(rt). In practice, daily compounding is very close to continuous compounding for most investment purposes.

Inflation reduces the real purchasing power of your returns. If your investment earns 10% but inflation is 6%, your real return is only about 4%. This calculator shows nominal returns, so factor in inflation separately to understand true wealth growth.

APR (Annual Percentage Rate) is the simple annual interest rate without compounding. APY (Annual Percentage Yield) includes the effect of compounding. APY is always higher than APR when compounding occurs more than once per year. For example, 12% APR compounded monthly gives 12.68% APY.

Daily compounding yields the highest returns, followed by monthly, quarterly, half-yearly, and annual compounding. For a Rs 1,00,000 investment at 10% for 10 years, daily compounding gives about Rs 2,71,828 while annual compounding gives Rs 2,59,374. However, the practical difference between daily and monthly compounding is minimal for most investors.

Debt mutual funds earn interest on their underlying fixed-income securities, and this interest is reinvested in the fund. While debt funds do not guarantee compounding like FDs, the fund manager reinvests coupon payments and maturing proceeds, creating a compounding effect. Over 5-10 years, even a 7-8% return in debt funds compounds substantially.

For regular monthly contributions with compounding, use the formula: FV = P × [((1 + r)^n - 1) / r] × (1 + r), where P is the monthly investment, r is the monthly rate (annual rate ÷ 12), and n is the total number of months. This accounts for each monthly contribution starting to earn interest from the investment date.

Early withdrawals severely disrupt compound growth because you not only lose the withdrawn amount but also all the future compounding that amount would have generated. For example, withdrawing Rs 1,00,000 after 10 years from a 30-year investment at 12% costs you over Rs 9,00,000 in lost final corpus.

Continuous compounding assumes interest is calculated and added an infinite number of times per year. The formula is A = P × e^(rt). While no practical investment uses true continuous compounding, it is used in option pricing models like Black-Scholes, and some high-yield savings accounts approximate it closely.