Compounding calculator

What the curve assumes

Every month returns exactly the rate you entered. No losing months, no drawdowns, no period where the strategy is mismatched to conditions for eight weeks. That is not a small simplification — it is the entire difference between a projection and a forecast.

Our own out-of-sample result was positive in three months of five, not five of five. The in-sample period was positive every month, which is exactly the kind of result that produces a smooth curve and exactly the kind that does not generalise.

Use it for the shape, not the number

What compounding calculators are genuinely good for is showing how much the rate matters relative to the starting balance over long horizons, and how heavily withdrawals interrupt it. Both are real effects worth understanding.

What they are not good for is target-setting. A monthly return above about 10% sustained over years implies performance no retail system has demonstrated, and a vendor quoting that figure is not quoting the drawdown that accompanies it.

Withdrawals change the picture more than people expect

A fixed monthly withdrawal is a growing proportion of a shrinking account and a shrinking proportion of a growing one. Early withdrawals cost far more than late ones because they remove capital that would have compounded for the entire remaining period.