1. What is Compound Growth?

Compound growth refers to the process where an investment grows exponentially over time as earnings are reinvested to generate additional earnings. This concept is fundamental in finance and investing.

2. How Does the Calculator Work?

The calculator uses the compound growth formula:

Where:

• \( FV \) — Future value of the investment
• \( Investment \) — Initial investment amount
• \( g \) — Growth rate (as a decimal)
• \( t \) — Time period in years

Explanation: The formula calculates how much an investment will grow over time when earnings are reinvested at a constant rate.

3. Importance of Compound Growth

Details: Understanding compound growth helps investors make informed decisions about long-term investments and retirement planning. It demonstrates how small, regular investments can grow significantly over time.

4. Using the Calculator

Tips: Enter the initial investment amount in USD, growth rate as a decimal (e.g., 0.07 for 7%), and the time period in years. All values must be positive.

5. Frequently Asked Questions (FAQ)

Q1: How does compound growth differ from simple growth?
A: Simple growth calculates interest only on the principal amount, while compound growth calculates interest on both the principal and accumulated interest.

Q2: What's a realistic growth rate for investments?
A: Historically, stock markets have returned about 7-10% annually, but this varies by asset class and economic conditions.

Q3: How often is compounding typically done?
A: While this calculator uses annual compounding, in practice compounding can occur annually, quarterly, monthly, or even daily.

Q4: What's the Rule of 72?
A: A quick way to estimate doubling time: 72 divided by the growth rate (as a percentage) gives approximate years to double.

Q5: Can this calculator handle additional contributions?
A: This version calculates growth on a single initial investment. For regular contributions, a different formula is needed.