Long-term fund savings plan

📖 The story

Kevin puts $250 per month into a global equity fund for 20 years and expects 9 % return per year.

ℹ Ordinary payment, 12 installments per year.

Change any number and press "Calculate" – or use "Type in" on the right to watch it entered.

What you learn

Over two decades the gain in value exceeds the total of the deposits several times over – compound interest grows more powerful with every year.

In short: Over two decades the gain in value exceeds the total of the deposits several times over.

Formula

FV = K0·q^n + R·(q^n − 1)/(q − 1), q = (1+i_eff)^(1/m)

With the example numbers

q = (1+0,0900)^1/12 = 1,007207, n = 20·12 = 240
FV = 250,00 €·(qⁿ−1)/(q−1) = 159.712,93 €

How to read the formula

Every installment earns interest until the end – early installments longer, late ones shorter. The bracket (qⁿ−1)/(q−1) sums up all these differently compounded contributions at once. q is the growth factor per period: from the effective rate p.a. the matching monthly factor is derived via the ¹ᐟᵐ root. Takeaway: it is not the sum of the deposits that counts, but how long each dollar is allowed to work.

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