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How to select a rate of return

Our compound interest calculator helps you see how much return you could expect on your investment.

  • The return expectation is a couple of percent for extremely safe investments and potentially 3–5% for investments with an average risk. 
  • If you are a high-risk investor trading in equities, your rate of return could be above 6–7%. Historically the equity markets have grown on average by around 7% annually.

You can mitigate your risks by diversifying your savings or investments. We recommend that you do this by investing in different asset classes, such as equities and fixed-income securities, as well as in various industries, countries or regions.

You can set the annual rate of return to 7%, for example, as the equity markets grow on average by around 7% annually based on historical data. It’s good to remember that the value of your investments may rise or fall. In some years you get a high return on your investments and in some years you make a loss. However, in the long term the average return is typically positive. 

Please note that we cannot guarantee that you will reach the rate of return shown in the savings calculator even if you follow the corresponding investment strategy. The savings calculator is meant to illustrate the returns you could gain depending on the amounts, savings period and rate of return you select. The value of and/or the return on your fund units, equities and other investment or savings products may increase or decrease with market movements and it is not certain that you will get back the entire amount you invested.

How does the compound interest calculator (savings calculator) work?

The calculator illustrates the effect of compound interest on your savings. But what does compound interest mean?

To put it simply, compound interest is interest earned on previously earned interest. When it comes to compounding, time is on your side – the earlier you start investing or the longer you let your money grow, the more time you have to earn compound interest. As the principal amount grows every year, you earn interest not only on your original investment but also on the return on that investment.

How does compound interest work?

If you invest 1,000 euros with a 5% rate of return, you will see 50 euros added to your original investment of 1,000 euros after the first year. This brings the total value of your investment to 1,050 euros. In the second year, you will get a higher return whether you invest more or not.

Should the rate of return remain at 5%, your new principal amount of 1,050 euros would grow by another 5%, or 52.50 euros, giving you a total of 1,102.50 euros after the second year. You will therefore have earned interest on your principal amount and also on the interest you earned in year one.

Why is regular saving important?

The most savvy savers do not just let their original investment grow but contribute to it on a regular basis. Through regular saving, your principal amount grows constantly. This also means that you will earn more interest and can enjoy your growing investments. 

You can enter four values into the savings calculator:

  • Initial amount: This could be either a single lump sum or how much you have currently saved. If you don’t want to invest a lump sum and you don’t have any savings, enter zero in this field.
  • Saving period: The number of years you plan to save for.
  • Annual rate of return: How much you expect your savings to grow each year.
  • Monthly saving amount: The amount you plan to invest through regular monthly saving. 

You can enter all values manually or move the slider. The total amount below the calculator shows you how much your savings could grow during the time period you have selected. You can play around and see how changing things affects the total. 

The saving period tells you how long you should be prepared to save to reach your goal. If you have a specific savings goal in mind and you have selected an annual rate of return, you can try entering different time periods to see how they affect the total. This way you can work out how long it will take you to reach your goal.

By changing your monthly saving amount, you can see how much you need to save each month to hit your target.

When it comes to regular saving, the earlier you start, the better the results. The effect of compounding means that the total return from your monthly savings will grow year by year. The interest you earn on your savings is added to the principal. As well as earning interest on the savings, you also earn interest on the interest itself. Read more about monthly saving and how to start it.

Please note that this calculator provides an illustration only. It does not take into account any fees, charges and other costs payable to the investment fund which will affect the performance of your investment.

Important information about investing

The information provided on this website is intended for general product information only and does not constitute investment advice or recommendations. When it comes to funds or equities, past performance is not a guarantee of future results. The value of fund units or equities may increase or decrease due to market movements, and it is not certain that you will get back the entire amount you invested.