The power of compounding — see growth with daily, monthly, or annual frequency.
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Interest Earned
How Compound Interest Works
A = P(1 + r/n)^(nt) + PMT × [(1 + r/n)^(nt) − 1] / (r/n)
A = Final | P = Principal | r = Rate | n = Periods/yr | t = Years | PMT = Regular payment
The key insight: you earn interest on your interest. Each period, your entire balance earns the rate — creating exponential growth that accelerates over time.
Daily vs Monthly Compounding
$10,000 at 5% for 10 yrs: Daily = $16,487 | Monthly = $16,470 | Annual = $16,289. Frequency matters far less than the rate or time invested.
The Power of Starting Early
$500/month from age 25 at 7% = $1.24M at 65. Starting at 35 = $567K. 10 extra years nearly doubles the outcome.
Frequently Asked Questions
S&P 500 historical: ~10.7% nominal, ~7.5% real (after inflation, 30yr). TSX Composite: ~8.5% nominal. A diversified global portfolio typically targets 6–8% nominal. These are long-run averages — individual years range from -50% to +50%.
A 1% management fee on $100,000 at 7% over 30 years costs approximately $180,000 in foregone wealth. Fees compound in reverse — they reduce the base from which future returns are calculated. See our Investment Fees Calculator for the exact impact.
APR (Annual Percentage Rate) is the stated rate without compounding. APY (Annual Percentage Yield) is the effective rate after compounding. 5% APR monthly = 5.116% APY. Banks advertise APY for savings (higher) and APR for loans (lower). Always compare the same metric.
⚠️ Past returns not guaranteed. Returns vary. Not financial advice.
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