The key effects of compounding interest on principal amounts have been appreciated for a long time. To get an idea of the general effects of changing the key variables, select different frequencies of paying interest, any scheduled regular additional amounts contributed and the time period.
Compounding interest means when interest is paid, all of it is added to the principal, so interest starts being applied to the new, higher principal amount. Each time interest is paid, it adds to the amount of interest earned the next time the interest is paid.
Generally, even small amounts of interest added more frequently give bigger effects over time: “compounding”. The general effect is increased even more if small additional amounts are regularly contributed to the principal.
Of course, this simplifies to show the general effect of changing the key variables. The calculations are for the purposes of illustration only. They are not forecasts, projections or guarantees. The calculations use assumptions which might later differ from actual conditions. The key assumptions assume retention of all of the principal in the investment (no withdrawals), full payment of interest on time, regular payments by you (if you choose that), no fees charges or costs, no tax and payment in full at the end of the chosen period. The calculator simplifies the calculations over many years due to leap years. Changes to any of those assumptions can have a material impact on outcomes.
This calculator assumes regular contributions in the amounts and timing you choose, and that all assumptions including external factors will operate at set, steady rates for as long as you choose in the calculator, even if events turn out differently from what's assumed.
These assumptions are essential so the calculator can show the effect of things you can control or might be controlled by others.
In the real world, variables might change without your control, or some principal reductions might be made from time to time. Tax might have to be paid at times. The financial arrangement might end sooner than you planned. The calculation is in today’s dollars, so they do not show the effect of inflation on purchasing power of the amounts.
Still, it is useful to see the general effects of changing the key variables.
This calculator is not for investments in Blossom Fund. There is no implied alignment with actual or forecast performance of an investment in Blossom Fund (earnings, distributions and return of capital). There is no forecast for investment in Blossom Fund or assurance of future performance or return of capital invested in Blossom Fund.
Investment in Blossom Fund is subject to many discretions within the control of the responsible entity and also variables outside our control. Expenses of Blossom Fund, tax on your income and changes to law and tax and to market conditions relevant to investments can have material effects on actual returns, including the legal possibility of Blossom Fund being wound up. Actual performance of Blossom Fund can be much more variable, without any guarantees. (Please see the PDS dated 14 May 2021 here.)
This calculator is provided by BlossomApp Pty Limited ABN 74 644 216 151 (BlossomApp) and does not take account of your objectives, financial situation or needs. You should obtain financial, legal and taxation advice before making any investment decision. The calculator is not a substitute for your own assessment. You should not make any decisions by using the calculator.