Compound vs simple interest: see the difference.
Simple interest is earned only on the original amount; compound interest is also earned on past interest. Over long periods the gap becomes large.
₹
₹1K₹1Cr
%
1%20%
yrs
1 yr40 yrs
112
Simple interest total—
Compound interest total—
Extra from compounding—
CompoundSimple
For illustration only, at the rates you enter. Actual results will differ.
Get a free planHow it is calculated
Simple: A = P × (1 + r × t) · Compound: A = P × (1 + r ÷ n)n × t
where n is how many times a year interest is added (4 = quarterly, 12 = monthly).
Common questions
Why is compounding so powerful?
Because returns start earning returns. The longer the period, the bigger the effect.
Do mutual funds compound?
Growth options reinvest gains automatically, so the value compounds, though returns vary year to year.
What is the effective annual rate?
It is the yearly rate after compounding: (1 + r ÷ n)^n − 1.
Mutual fund investments are subject to market risks; read all scheme-related documents carefully. Returns shown are illustrations at an assumed rate and are not guaranteed. Plenitude Connect is an AMFI-registered Mutual Fund Distributor (ARN-130934); these tools are for education and are not investment advice.
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