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Projection Tools

Compound & Income
Calculator

“Our favorite holding period is forever.”— Warren Buffett
Final portfolio
$546.8K
4.21× contributions
Annual dividends
$49.9K
$4.2K / month
Total contributions
$130K
20y × $500 / mo
Net gain
$416.8K
320.6% total
Preset
Final Portfolio
$546.8K
Year 20 nominal — $333.7K in today's money
Nominal20y horizon
Annual Dividends
$49.9K
Avg. $4.2K / mo · reinvested
✓ Net of tax5.5% growth
Wealth Multiple
4.21×
Final value per dollar contributed over the horizon
Compounded
Total Contributions
$130K
Initial $10K + 240 monthly deposits
20y × $6K/yr
Compounding Arc

Portfolio Evolution

Nominal values, not adjusted for inflation.
Balanced
Portfolio valueCumulative contributionsAnnual dividends (right axis)
Y1Y4Y7Y10Y14Y20$0$150K$300K$450K$600K$0$15K$30K$45K$60K
◆ ReadingOver the horizon, reinvested dividends are the primary engine of growth, contributing $248.6K of the final value. The compounding inflection point — where the portfolio generates more wealth from itself than from new deposits — emerges as dividends are reinvested and grow year over year.
Income Trajectory

Passive Income Timeline

Monthly dividend income over the horizon, with your $2K / mo target marked in emerald.
✓ Target reached Y17
Y2Y5Y8Y11Y14Y17Y20$0$1.5K$3K$4.5K$6K◆ Target $2KY17 ◆
Key Moments

Milestones

Inflection points on the projected path.
Y2
Real (inflation-adjusted) portfolio doubles initial capital
Year 2
$23.7K in today's money
Y10
Annual dividends cover your annual contribution
Year 10
$6.7K in dividends vs $6K invested
Y12
Portfolio reaches 2× lifetime contributions
Year 12
$169K vs $82K invested
Y17
Passive income target reached
Year 17
$2.3K / month ≥ $2K target
Reverse Calculator

Goal Seek

Solve for the missing variable to reach your target.
$
yrs
Required monthly contribution
$449 / month
At your current assumptions, this monthly contribution compounded over 20 years would reach your $500K target.
Anatomy of Wealth

Final Value Breakdown

How the end portfolio decomposes. Hover a slice or row to highlight it.
$546.8K total
Total
$546.8K
total
Contributions
$130,000
23.8%
Capital appreciation
$168,141
30.8%
Reinvested dividends
$248,632
45.5% ◆ largest
Methodology & Notes
  • Monthly compounding. Contributions occur at the start of each month. Dividends are taxed at the withholding rate and fully reinvested (DRIP).
  • Capital appreciation is applied as a monthly compound. Dividend growth is applied annually to the effective yield. Both are simplifications of a stochastic real world.
  • Inflation is treated as a post-calculation deflator to express values in today's purchasing power.
  • Results are illustrative, not advice. Past performance does not indicate future returns. Tax treatment depends on jurisdiction.
The eighth wonder of the world

How compound interest builds wealth

Compound interest is the process of earning returns not only on your original capital but also on the returns it has already produced. Over a long horizon this turns a straight line into a curve: the portfolio begins to generate more growth from itself than from your new deposits. That inflection point — where compounding overtakes contributions — is the single most important moment in a long-term investing plan.

For a dividend investor the effect is doubled. Reinvested dividends buy more shares, those shares pay more dividends, and a rising dividend grows the yield on your original cost every year. This calculator models all of it — monthly contributions, dividend yield, dividend growth, price appreciation, withholding tax and inflation — so you can see both your future portfolio value and your future passive income.

The lesson compounding teaches is simple: time matters more than timing. Starting five years earlier usually beats investing more later. Want the full explanation, with worked examples and the cost of waiting? Read Compound Interest: the eighth wonder in the Academy.

Frequently asked questions

What is a compound interest calculator?

It is a tool that projects how an investment grows over time when returns are reinvested rather than withdrawn. This calculator goes further than a basic one: it models a dividend portfolio — combining an initial lump sum, monthly contributions, dividend yield, dividend growth, price appreciation, withholding tax and inflation — so you can see both your projected portfolio value and your future passive income.

How is compound interest calculated?

The core formula is A = P(1 + r/n)^(nt), where P is the principal, r the annual rate, n the number of compounding periods per year, and t the number of years. This calculator compounds monthly, reinvests dividends after tax (DRIP), grows the dividend each year, and applies price appreciation — a closer model of a real dividend-growth portfolio than the plain formula.

How much will I have if I invest $500 a month?

It depends on your time horizon and rate of return. As a rough guide, $500/month for 30 years at a 7% total annual return grows to roughly $600,000 — of which more than half is compound growth rather than your own deposits. Enter your own numbers above to see an exact projection, including the year your dividends alone start to cover your contributions.

Does this calculator account for inflation and taxes?

Yes. You can set a withholding tax rate on dividends (applied before reinvestment) and a CPI inflation assumption. Toggle 'inflation-adjusted' to see every value in today's purchasing power — the honest way to judge a long-term projection.

Why is compound interest called the eighth wonder of the world?

The line is popularly attributed to Albert Einstein: 'Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn't, pays it.' The point is that reinvested returns generate their own returns, so wealth accelerates over time rather than growing in a straight line — which is why starting early matters far more than the amount you start with.