Investment Calculator

How compound interest works

Compound interest reinvests the returns you earn: each period you earn a return on both your original capital and the accumulated interest. The effect amplifies over time and is further boosted by regular contributions. Example: €10,000 invested for 20 years at 7% per year grows to approximately €38,700 — without any additional contributions.

How to read the result

The final value includes your initial capital, all contributions made, and the interest generated. The multiplier shows how many times you have grown the total amount invested. Check the 'Contributions vs. interest' chart: over long horizons, interest typically exceeds total contributions — that is compound interest in action.

Important limitations

The return you enter is an assumption, not a guarantee. Real returns vary year to year and can be negative. This calculator does not account for inflation, capital gains tax, or management fees. Results are illustrative for comparing scenarios, not a projection of what you will actually receive.

Investment taxation in Spain: key points

In Spain, investment gains are taxed as savings income (base imponible del ahorro) in the personal income tax (IRPF). The 2024 rates are: 19% on the first €6,000 of gains, 21% on €6,000–€50,000, 23% on €50,000–€200,000, 27% on €200,000–€300,000, and 28% above €300,000. Gains are only taxed when you sell: while you hold, no tax is due on paper gains. This makes the investment holding period particularly important: the longer you hold without selling, the greater the benefit of tax deferral on the full compounding capital. Spanish investment funds also offer a tax-efficient feature: you can transfer between funds without triggering a taxable event, making them highly efficient for long-term investors resident in Spain.

Asset types and products for the individual investor

Individual investors have access to a wide range of assets: individual shares (high potential return, high company-specific risk), index funds and ETFs (broad diversification at low cost, tracking indices like MSCI World or S&P 500), bonds and fixed-income funds (lower volatility, more predictable returns), commodities such as gold (inflation hedge, no income generation), and bank deposits or savings accounts (capital guaranteed, limited returns). For a long horizon of 10 years or more, the historical evidence strongly supports diversified equity-heavy portfolios outperforming inflation and conservative assets. For short horizons (under 3 years), equity volatility can be very damaging and lower-risk assets should be prioritised. The historical reference returns included in this calculator help you contextualise what rate is reasonable for each asset type.

Frequently asked questions

What is the difference between monthly and annual compounding?

With monthly compounding, interest is calculated and reinvested every month; with annual compounding, only once a year. More frequent compounding produces a slightly higher final value for the same nominal rate, though the difference is small at typical rates.

When should I use the historical reference returns?

They are for context only. They reflect historical average returns of well-known indices — they do not predict what you will earn. Use them to judge whether the rate you are testing is reasonable, not as a performance promise.

Are monthly contributions added at the start or end of each month?

At the start of each period, which slightly maximises the result compared to end-of-month contributions. This is the standard convention for systematic savings plans.

Is it better to invest a lump sum or make regular contributions?

Statistically, investing all at once (lump sum) produces better results because more capital is exposed to the market for longer. However, investing periodically — known as dollar cost averaging — reduces the risk of buying at a peak and is psychologically easier to sustain over the long term. For most individual investors, consistent monthly contributions are the most practical strategy and help maintain investment discipline regardless of market volatility.

How much impact do management fees have on the final result?

The impact of fees is enormous over long periods due to the reverse compounding effect. An annual fee of 1.5% can reduce the final portfolio value by 30–40% over 30 years compared to a product with a 0.1% fee. Index funds and ETFs typically have total expense ratios (TER) below 0.2%, versus 1–2% for actively managed funds. When using this calculator, enter the return after fees for the most realistic result.