See exactly how your money grows with monthly contributions or a one-time investment — compound interest, year-by-year breakdown, and lump sum vs recurring comparison.
Compound interest is often called the eighth wonder of the world — and for good reason. When you invest, your returns generate their own returns. In Year 1 you earn interest on your principal. In Year 2 you earn interest on your principal plus last year's gains. This snowball effect accelerates dramatically over time.
The chart shows what happens when you invest just $500 per month at a 10% average annual return over 30 years. You contribute a total of $180,000 — yet your portfolio grows to over $1 million. That's more than $820,000 in pure investment gains, generated entirely by compound growth.
The S&P 500 has historically returned around 10% per year on average over long periods — making diversified index fund investing the most commonly cited benchmark for these projections.
Monthly investing uses the future value of an annuity formula — a compound interest equation built for regular, equal payments. The critical variable is r, the monthly interest rate, which converts your annual rate into a per-period rate that compounds every month.
A one-time lump sum uses the simpler future value formula — all money is deployed at once and compounds at the annual rate for the full duration. This is why lump sum typically wins in rising markets: more capital is at work from day one.
A widely cited Vanguard study found that lump sum investing outperforms dollar-cost averaging (monthly investing) approximately two-thirds of the time across US, UK, and Australian markets. The reason is simple: more money compounding for longer generates more wealth.
However, this doesn't mean monthly investing is wrong for you. Three important caveats apply:
Use the Lump Sum vs Monthly tab above to compare both strategies with your own numbers.
Small, consistent decisions compound into significant wealth over time. Here's what actually moves the needle.
Common questions about compound interest, monthly investing, and how to use this calculator.
It uses the future value of an annuity formula to project how regular contributions grow over time with compound interest. It factors in your monthly amount, expected annual return rate, and investment duration to estimate your total portfolio value, total amount contributed, and investment gains.
The S&P 500 has historically returned approximately 10% per year on average before inflation (about 7% after inflation) over long periods. For conservative planning, 7% is commonly used to account for inflation. Bonds average 4–6%. For an aggressive all-equity portfolio, 10% is a reasonable long-term assumption. Past performance does not guarantee future results.
Vanguard research found that lump sum investing outperforms monthly investing about two-thirds of the time in rising markets. However, monthly investing is more practical for most people who earn a salary, removes market timing risk, and outperforms lump sum during market downturns via dollar-cost averaging. The best strategy is usually the one you can actually sustain.
At a 10% annual return: $500/month reaches $1 million in about 30 years; $1,000/month gets there in about 24 years; $2,000/month in about 20 years. The earlier you start, the less you need to contribute monthly. Use the calculator above to model your exact scenario.
Divide 72 by your annual return rate to estimate how many years it takes to double your money. At 10%, your investment doubles every 7.2 years. At 7%, every 10.3 years. At 6%, every 12 years. It's a quick mental shortcut that works for any compounding investment — including savings accounts, bonds, or stock portfolios.
Dollar-cost averaging (DCA) is investing a fixed dollar amount at regular intervals regardless of market price. When prices are low, your fixed amount buys more shares; when high, fewer. Over time this averages your cost per share and removes emotional market timing. It's the mechanism behind monthly 401(k) contributions, Roth IRA investing, and auto-invest brokerage accounts.