Investment Calculator

Calculate the future value of investments with compound interest. See how regular saving and long-term investing builds wealth.

Investment Details

Stocks historically: 6-8%. Bonds: 3-4%. Savings account: 1-3%.

Stocks/funds: 22% on dividends and gains. Savings account: 22% on interest. Equity savings account: deferred tax.

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Compound Interest – The Eighth Wonder of the World

Albert Einstein is said to have stated that "compound interest is the eighth wonder of the world. He who understands it, earns it. He who does not, pays for it."

What is Compound Interest?

Compound interest means you earn returns on both your original investment and on previously earned returns. Over time, this results in exponential growth.

The Formula for Compound Interest

With a Lump Sum

Future Value = Initial Capital × (1 + interest rate)^years

With Monthly Contributions

Future Value = Monthly Contribution × [(1 + r)^n - 1] / r × (1 + r)

Where:

  • r = monthly interest rate (annual rate / 12)
  • n = number of months

Example: The Power of Starting Early

Person A - Starts at age 25

  • Monthly saving: £3,000
  • Stops saving at 35 (10 years of saving)
  • Total contributions: £360,000
  • Let money grow until 65 (40 years total)
  • Return: 7% per year
  • Value at 65: approx. £2,131,000

Person B - Starts at age 35

  • Monthly saving: £3,000
  • Saves until 65 (30 years of saving)
  • Total contributions: £1,080,000
  • Return: 7% per year
  • Value at 65: approx. £3,679,000

Conclusion: Person A invests only 1/3 of what Person B does, but ends up with 58% of the value thanks to 10 extra years of growth!

Rule of 72

A simple rule of thumb to estimate how long it takes for your investment to double:

Years to double = 72 / annual return (%)

Examples:

  • 7% return: 72 / 7 = approx. 10 years
  • 8% return: 72 / 8 = 9 years
  • 10% return: 72 / 10 = 7.2 years

Historical Returns

Stocks (Oslo Stock Exchange)

  • Long-term average (50+ years): approx. 8-9% per year
  • Risk: High short-term volatility
  • Recommended horizon: Minimum 10 years

Global Equity Funds

  • Long-term average: approx. 6-8% per year
  • Advantage: Diversification, global growth
  • Example: MSCI World Index

Bonds

  • Government bonds: 2-4% per year
  • Corporate bonds: 3-5% per year
  • Risk: Low to moderate

Bank Deposits

  • Savings account: 1-3% per year (varies with base rate)
  • Risk: None (deposit guarantee up to £200,000)

Investment Tax in Norway

Stocks and Equity Funds

  • Dividends: 22% tax after allowance
  • Capital gains: 22% tax after allowance
  • Allowance: Reduces tax on low returns

Equity Savings Account (ASK)

  • Deferred tax: Tax is paid only upon withdrawal
  • Maximum amount: £1.272 million (2024)
  • Advantage: Reinvest without tax deductions along the way

Bank Deposits

  • Interest income: 22% tax
  • Wealth tax: Value over £170,000 (2024)

Risk and Return

There is a fundamental relationship between risk and expected return:

  • Low risk → Low return: Bank deposits, government bonds
  • Moderate risk → Moderate return: Balanced funds, corporate bonds
  • High risk → High return: Stocks, equity funds

Diversification Reduces Risk

By spreading your investments across asset classes, sectors, and regions, you can reduce risk without sacrificing expected returns.

Tips for Successful Investing

  • Start early: Time in the market beats market timing
  • Invest regularly: Monthly saving smooths out market fluctuations
  • Long-term horizon: Minimum 10 years for stocks
  • Keep costs low: Choose low-fee index funds
  • Diversify: Don’t put all your eggs in one basket
  • Reinvest dividends: Maximise the effect of compound interest
  • Avoid timing: Don’t try to time the market
  • Stick to the plan: Don’t sell in panic during downturns