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Compound Interest Calculator

Principal Amount

₹ 1 Lac

₹ 10 Cr.

Assumed Rate of Return

1%

13%

Period

1 Yr.

20 Yrs.

Compound interval

Yearly

Half Yearly

Quarterly

Monthly

Compounding
Calculator
Principal Amount
Total Maturity Amount
Principal Amount

Period
Assumed Rate of Return

Total Maturity Amount
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Achieve your Financial Goals with Mutual Fund Investments

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Disclaimer: The calculator alone is not sufficient and shouldn't be used for the development or implementation of an investment strategy. This tool is created to explain basic financial / investment related concepts to investors. The tool is created for helping the investor take an informed investment decision and is not an investment process in itself. Bajaj Finserv AMC has tied up with AdvisorKhoj for integrating the calculator to the website. Mutual Fund does not provide guaranteed returns. Also, there is no assurance about the accuracy of the calculator. Past performance may or may not be sustained in future, and the same may not provide a basis for comparison with other investments. Investors are advised to seek professional advice from financial, tax and legal advisor before investing in mutual funds.

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What is compound interest?

 

Compound interest is a way of earning interest on both the money you initially put in and the interest that money earns over time. Here’s how it works: let’s say you deposit Rs. 100 into a savings account that pays compound interest. The bank calculates interest not just on the Rs. 100 you deposited, but also on the interest that Rs. 100 earns over time.

Now, here’s why compound interest is powerful: Over longer periods, your money grows faster because each time interest is added, it’s based on a larger amount – your original money plus the interest it has already earned. This means your savings can grow significantly over time. It’s like a snowball effect where your savings build on themselves, helping you reach your financial goals sooner.

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What is a compound interest calculator?

 
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A compound interest calculator is a sophisticated tool empowering investors to explore the potential impact of compounding on their investments over time. By factoring in elements like the principal amount, interest rate, and compounding frequency, this calculator provides insights into how compounding can exponentially grow your wealth in the long run. With a compounding calculator, you can explore the compounding effect and gain a nuanced understanding of how small adjustments today lead to significant gains in the future.

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How can a compound interest calculator help you?

 
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A compound interest calculator offers a range of benefits to enhance your financial planning and decision-making process. Here is how it can help you:

  • Accurate results: A compound interest calculator provides precise calculations swiftly, saving time and ensuring accuracy in determining future investment values. While your actual returns may vary basis the market condition, the compounding calculator can help you get an estimate.

  • Easy to use: It offers a user-friendly interface for effortless input of data, making complex financial projections accessible and understandable.

  • Multiple investments: A compounding calculator can help you handle various investment scenarios simultaneously, allowing comparisons between different interest rates and compounding frequencies.

  • Assists in planning: It facilitates comprehensive financial planning by projecting growth potential over specified time frames, helping in setting realistic savings goals.

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How does a compound interest calculator work?

 
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A compound interest calculator works by taking key financial inputs and using them to compute how investments grow over time through compounding. Here’s a simplified breakdown of its operation:

  • Initial inputs: You input the initial investment amount (principal), the annual interest rate, the investment horizon, and the compounding frequency (such as annually, semi-annually, quarterly, or monthly).

  • Calculation: The calculator uses a mathematical formula that takes into account the principal, interest rate, and compounding frequency to compute the future value of the investment over specified time periods.

  • Compound effect: It calculates interest not only on the initial principal but also on the accumulated interest from previous periods. This compounding effect accelerates the growth of your investment over time.

  • Projection: Based on the inputs provided, the calculator generates a projection of how your investment will grow, showing both the total amount accumulated and the breakdown of principal versus interest earned.

  • Comparisons and planning: You can use the calculator to compare different scenarios by adjusting inputs like interest rates or compounding frequencies, helping you make informed decisions about your savings and investment strategies.

In essence, a compound interest calculator simplifies complex financial calculations, enabling individuals to visualize and plan for the potential growth of their investments over time.

Compound interest formula and steps to calculate compound interest

The compound interest calculator utilizes a predefined formula to calculate the future value (A) using the provided inputs. The compound interest formula commonly used is:

A = P (1 + R / n) ^ (nT)

Where:

A = Future value of the investment
P = Principal amount
R = Interest rate (as a decimal)
n = Number of compounding periods per year
T = Time period (in years)

The calculator applies this formula to compute the total amount accumulated at the end of the investment duration, taking into account the principal amount, interest rate, compounding frequency, and investment period. This calculation provides insight into how the investment grows over time, including the compounded interest earned.

How to use Bajaj Finserv AMC compound interest calculator?

Using Bajaj Finserv AMC compound interest calculator is straightforward:

  • Input current details: Begin by entering your current financial details – principal amount, interest rate, and the duration of investment.

  • Specify compounding frequency: Choose the frequency at which interest is compounded – monthly, quarterly, annually.

  • Generate projections: Watch as the compound interest calculator unveils projections, illustrating how compounding can potentially boost your over the investment horizon.

Benefits of Compounding

Compound interest offers a range of benefits that make it a cornerstone of effective long-term financial planning. Here are some of the benefits of compounding:

  • Exponential growth: Witness your wealth grow exponentially over time as you earn gains on your previous returns.

  • Long-term wealth creation: Optimize compounding to create a robust foundation for long-term financial success. The longer the investment horizon, the more powerful is the effect of compounding in multiplying gains.

  • Inflation hedge: It can act as a hedge against inflation by potentially outpacing the rate of inflation, thereby preserving the purchasing power of your money.

  • Financial discipline: Regular contributions to investments that benefit from compound interest promote financial discipline and responsible financial habits.

Advantages of using Bajaj Finserv AMC compound interest calculator

Bajaj Finserv AMC compounding calculator offers the following advantages:

  • Strategic planning: Plan your investments strategically, considering the compounding frequency that aligns with your financial goals.

  • Visualize growth: Get a clear visual representation of how compounding can impact your portfolio over different time frames.

  • Goal alignment: Align your investment strategy with specific financial goals, adapting as your needs evolve.

Difference between simple interest and compound interest calculation

Differentiating between simple interest and compound interest is crucial for understanding how investments grow over time.

Simple interest is calculated only on the principal amount of an investment or loan. It remains constant throughout the investment period, regardless of how much interest has been accumulated. Compound interest, on the other hand, takes into account not only the initial principal but also the accumulated interest from previous periods. This means that each time interest is calculated and added to the principal, the next calculation is based on a larger amount. As a result, compound interest grows faster than simple interest over time, leading to exponential growth in investments.

Here's a comparison table highlighting the key differences between simple interest and compound interest:

Aspect Simple interest Compound interest
Calculation Interest is calculated only on the principal Interest is calculated on principal + accumulated interest
Growth Linear growth Exponential growth
Formula I = PxRxT A = P (1 + R / n) ^ (nT)
Effect of Time Interest amount remains constant Interest amount increases over time
Application Commonly used for short-term loans or simple savings accounts Commonly used for long-term investments and savings
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Frequently Asked Questions

 
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Compounding in finance is when the returns on an investment, such as interest or dividends, are reinvested to earn additional earnings over time. has context menu

Regular investment contributions enhance compounding in mutual funds by consistently adding to the invested amount, allowing for a larger principal amount to generate returns.

To benefit from compounding, it's essential to start investing early, stay invested for the long term, and reinvest your earnings rather than cashing them out.

Compound interest allows investments to grow faster over time due to earning interest on interest.

Compounding power works by reinvesting earned interest, which in turn earns more interest over time.

These refer to how often interest is calculated and added to the principal amount in a year—daily, monthly, or annually.

Compounding daily generally results in higher returns because interest is calculated more frequently on the growing balance.

It accelerates the growth of investments by continually adding earned interest to the principal amount.