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Compound Interest Formula:
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The Investment Fund Calculator estimates the future value of an investment using compound interest principles. It helps UK investors project growth of their funds over time based on principal amount, annual interest rate, and investment period.
The calculator uses the compound interest formula:
Where:
Explanation: The formula calculates how an initial investment grows over time with compound interest, where interest earned each year is added to the principal for the next year's calculation.
Details: Compound interest is fundamental to long-term investment growth. It allows your money to grow exponentially over time, making it a powerful tool for retirement planning and wealth accumulation.
Tips: Enter principal amount in GBP, annual interest rate as a percentage, and investment period in years. All values must be positive numbers.
Q1: What is the difference between simple and compound interest?
A: Simple interest is calculated only on the principal amount, while compound interest is calculated on both principal and accumulated interest, leading to faster growth.
Q2: How often is interest compounded in this calculator?
A: This calculator assumes annual compounding, which is common for many UK investment funds and savings accounts.
Q3: Are there any fees or taxes considered?
A: This calculator shows gross returns before fees and taxes. Actual returns may be lower due to management fees, platform charges, and applicable taxes.
Q4: Can I use this for regular contributions?
A: This calculator is for lump sum investments only. For regular contribution calculations, a different formula would be needed.
Q5: Is this suitable for all UK investment types?
A: This calculator works well for fixed-rate investments, bonds, and funds with consistent returns. For volatile investments like stocks, actual returns may vary.