{"id":13627,"date":"2025-10-02T09:59:37","date_gmt":"2025-10-02T07:59:37","guid":{"rendered":"https:\/\/schweizerfinanzblog.ch\/why-arent-we-all-millionaires-by-now-if-the-compound-interest-effect-is-so-simple-6-stumbling-blocks\/"},"modified":"2025-11-06T00:00:00","modified_gmt":"2025-11-05T23:00:00","slug":"why-arent-we-all-millionaires-by-now-if-the-compound-interest-effect-is-so-simple-6-stumbling-blocks","status":"publish","type":"post","link":"https:\/\/schweizerfinanzblog.ch\/en\/why-arent-we-all-millionaires-by-now-if-the-compound-interest-effect-is-so-simple-6-stumbling-blocks\/","title":{"rendered":"Why aren&#8217;t we all millionaires yet? 6 compound interest pitfalls"},"content":{"rendered":"\n<p class=\"wp-block-paragraph\"><strong>We&#8217;ve written about compound interest on this blog many times. But in conversations we keep noticing the same thing: even very smart people can barely imagine the power behind it. We catch ourselves thinking linearly too \u2013 exponential growth stays abstract.<\/strong><\/p>\n\n<p class=\"wp-block-paragraph\"><strong>High time to take a closer look: why do most people never experience the \u201c8th wonder of the world\u201d \u2013 as Albert Einstein supposedly called it? And what can you do about it? Or, to put it more bluntly: if the effect is so simple, why do so many people fail to turn it into real wealth?<\/strong><\/p>\n\n<link rel=\"stylesheet\" href=\"https:\/\/schweizerfinanzblog.ch\/wp-content\/themes\/schweizerfinanzblog\/components\/post-info-component\/post-info-component.css?v=3\">\n<div class=\"post-info-component sfb-post-info-autoren\">\n\t\t<span class=\"sfb-post-info-bilder\">\n\t\t<img decoding=\"async\" class=\"sfb-autor-bild\" src=\"https:\/\/schweizerfinanzblog.ch\/wp-content\/uploads\/2026\/07\/stefan_bw_round-autor-240.webp\" alt=\"Stefan Huser\" width=\"40\" height=\"40\" loading=\"lazy\"><img decoding=\"async\" class=\"sfb-autor-bild\" src=\"https:\/\/schweizerfinanzblog.ch\/wp-content\/uploads\/2026\/07\/toni_bw_round-1-autor-240.webp\" alt=\"Antun Brcina\" width=\"40\" height=\"40\" loading=\"lazy\">\t<\/span>\n\t\t<div class=\"sfb-post-info-text\">\n\t\t<div class=\"von-and-comments sfb-post-info-namen\">\n\t\tBy <a href=\"https:\/\/schweizerfinanzblog.ch\/en\/author\/stefan-huser\/\">Stefan Huser<\/a> and <a href=\"https:\/\/schweizerfinanzblog.ch\/en\/author\/antun-brcina\/\">Antun Brcina<\/a>\t<\/div>\n\t\t\t<div class=\"post-dates\">Updated on <time class=\"entry-date updated\" datetime=\"2025-11-06T00:00:00+01:00\">6.11.2025<\/time><\/div>\t\t<\/div>\n\t\t<a class=\"sfb-post-info-kommentare\" href=\"#comments\">1 Comments<\/a>\n\t<\/div>\n\n<link rel=\"stylesheet\" href=\"https:\/\/schweizerfinanzblog.ch\/wp-content\/themes\/schweizerfinanzblog\/components\/kurz-bundig-component\/kurz-bundig-component.css?v=2\">\n\n<div  id=\"CQsIqeF\" class=\"kurz-bunding mb-3\" style='background-color:#f9f9fa'>\n\t<div class=\"d-flex kurz-bunding-title\">\n\t\t<div>\n\t\t\t<img decoding=\"async\" class=\"kurz-bunding-icon\" src=\"https:\/\/schweizerfinanzblog.ch\/wp-content\/uploads\/2023\/01\/lifghtbulb2.png\">\n\t\t<\/div>\n\t\t<p class=''>\n\t\t\tIn a nutshell\t\t<\/p>\n\t<\/div>\n\n\t<div class=\"kurz-bunding-content\">\n\t\t<ul>\n<li><strong>Compound interest<\/strong> is the foundation of building wealth over the long term.<\/li>\n<li>Many people barely feel it because they <strong>give up too early<\/strong> or <strong>think linearly instead of exponentially<\/strong>.<\/li>\n<li>The first <strong>10 years<\/strong> often feel sobering \u2013 <strong>after that, the turbo kicks in<\/strong>.<\/li>\n<li><strong>Practical tip:<\/strong> the <strong>rule of 72<\/strong> shows how quickly compound interest doubles your capital (72 \u00f7 return in % = years until it doubles).<\/li>\n<li>If you&#8217;re aiming for <strong>financial freedom<\/strong>, you have to make consistent use of <strong>compound interest<\/strong>.<\/li>\n<li><strong>Your monthly contribution is the biggest lever:<\/strong> the <strong>higher<\/strong> it is and the <strong>earlier<\/strong> you start, the bigger the absolute effect.<\/li>\n<li>The easiest way to do this is with <strong>regular, automatic savings plans<\/strong> into <strong>broadly diversified equity ETFs<\/strong> \u2013 at <strong>low fees<\/strong> and without unnecessary <strong>withdrawals<\/strong>.<\/li>\n<\/ul>\n\t<\/div>\n\t\t\t\n\t<\/div>\n\n<style>\n\t#CQsIqeF .kurz-bunding-content li::marker{\n\t\tcolor: #37c392;\n\t}\n\t#CQsIqeF .kurz-bunding-call-to-action a{\n\t\tbackground-color: #1bab78;\n\t\tcolor: #FFFFFF;\n\t}\n\n<\/style>\n<p class=\"wp-block-paragraph\">\u00a0<\/p>\n\n<div id=\"toc_container\" class=\"no_bullets\"><p class=\"toc_title\">Contents<\/p><ul class=\"toc_list\"><li><a href=\"#What_does_compound_interest_actually_mean\">What does compound interest actually mean?<\/a><ul><li><a href=\"#A_quick_calculation\">A quick calculation<\/a><\/li><li><a href=\"#The_rule_of_72_compound_interest_for_practical_people\">The rule of 72: compound interest for practical people<\/a><\/li><\/ul><\/li><li><a href=\"#Compound_interest_held_back_6_typical_pitfalls\">Compound interest held back: 6 typical pitfalls<\/a><ul><li><a href=\"#Pitfall_no_1_Our_brain_thinks_linearly\">Pitfall no. 1: Our brain thinks linearly<\/a><\/li><li><a href=\"#Pitfall_no_2_Too_little_patience\">Pitfall no. 2: Too little patience<\/a><\/li><li><a href=\"#Pitfall_no_3_Amounts_that_are_too_small\">Pitfall no. 3: Amounts that are too small<\/a><\/li><li><a href=\"#Pitfall_no_4_Interruptions\">Pitfall no. 4: Interruptions<\/a><\/li><li><a href=\"#Pitfall_no_5_Emotions_volatility\">Pitfall no. 5: Emotions &amp; volatility<\/a><ul><li><a href=\"#Digression_Lombard_loans_double_the_upside_double_the_risk\">Digression: Lombard loans \u2013 double the upside, double the risk<\/a><\/li><\/ul><\/li><li><a href=\"#Pitfall_no_6_Costs_taxes_inflation_currency_risks\">Pitfall no. 6: Costs, taxes, inflation &amp; currency risks<\/a><\/li><\/ul><\/li><li><a href=\"#Financial_freedom_needs_compounding\">Financial freedom needs compounding<\/a><ul><li><a href=\"#But_watch_out_reality_isn8217t_linear\">But watch out: reality isn&#8217;t linear<\/a><\/li><li><a href=\"#Is_8_even_realistic\">Is 8% even realistic?<\/a><\/li><\/ul><\/li><li><a href=\"#Investment_vehicles_for_compound_interest\">Investment vehicles for compound interest<\/a><\/li><li><a href=\"#Try_it_yourself_our_compound_interest_calculator\">Try it yourself: our compound interest calculator<\/a><ul><li><a href=\"#Calculation\">\n\t\t\tCalculation\t\t<\/a><\/li><li><a href=\"#Diagram\">\n\t\t\tDiagram\t\t<\/a><\/li><\/ul><\/li><li><a href=\"#The_ingredients_have_to_work_together\">The ingredients have to work together<\/a><\/li><li><a href=\"#And_what_happens_once_you8217ve_reached_your_goal\">And what happens once you&#8217;ve reached your goal?<\/a><\/li><li><a href=\"#Updates\">Updates<\/a><\/li><li><a href=\"#Disclaimer\">Disclaimer<\/a><\/li><\/ul><\/div>\n<h2 class=\"wp-block-heading\"><span id=\"What_does_compound_interest_actually_mean\">What does compound interest actually mean?<\/span><\/h2>\n\n<p class=\"wp-block-paragraph\">The <a href=\"https:\/\/de.wikipedia.org\/wiki\/Zinseszins\" target=\"_blank\" rel=\"noreferrer noopener\">term<\/a> \u201ccompound interest\u201d is easily misleading: \u201cinterest\u201d here does <strong>not just mean classic bank interest<\/strong> \u2013 which hardly plays a role these days anyway. What matters is the principle of <strong>reinvesting returns<\/strong>. That covers <strong>everything<\/strong> an investment generates: interest, dividends and price gains too. The word <strong>compounding<\/strong> makes this clearer: it describes the interplay of all these returns. It&#8217;s exactly this principle that allows wealth to grow over time not linearly, but <strong>exponentially<\/strong>.<\/p>\n\n<p class=\"wp-block-paragraph\">Think of it like a worker you initially have to pay all by yourself. But as soon as the first returns come in and are reinvested, you hire more \u201cworkers\u201d. Each of them earns money for you without you having to lift a finger. With patience, this \u201cteam\u201d keeps growing \u2013 and at some point the passive income it generates clearly exceeds your regular earned income.<\/p>\n\n<h3 class=\"wp-block-heading\"><span id=\"A_quick_calculation\">A quick calculation<\/span><\/h3>\n\n<p class=\"wp-block-paragraph\">If you invest CHF 10,000 for 40 years at an annual return of 8% and consistently reinvest all returns, compound interest will grow it to around <strong>CHF 243,000<\/strong>.<\/p>\n\n<p class=\"wp-block-paragraph\">If, on the other hand, you paid out the annual 8% like a <strong>coupon<\/strong> into a separate account that earns no interest, you&#8217;d end up with only about <strong>CHF 42,000<\/strong> after 40 years.<\/p>\n\n<p class=\"wp-block-paragraph\">In the first few years, the difference hardly seems worth mentioning \u2013 after <strong>10 years<\/strong>, the compound interest version is only slightly ahead at <strong>CHF 22,196<\/strong> versus <strong>CHF 18,000<\/strong> for the coupon.<\/p>\n\n<p class=\"wp-block-paragraph\">But from that point on, <strong>the gap keeps widening<\/strong>: the longer you stay invested, the faster growth accelerates.<\/p>\n\n<p class=\"wp-block-paragraph\">After 40 years, the difference is already more than<strong> CHF 200,000<\/strong> \u2013 which is what makes compound interest the legendary <strong>\u201c8th wonder of the world\u201d!<\/strong><\/p>\n\n<figure class=\"wp-block-image size-full\"><img decoding=\"async\" src=\"https:\/\/schweizerfinanzblog.ch\/wp-content\/uploads\/2025\/09\/Zinseszins_vs_Coupon_EN.png\" alt=\"Compound interest\" class=\"wp-image-13557\"\/><figcaption class=\"wp-element-caption\">The difference is enormous: at 8% p.a. (compounded monthly), CHF 10,000 grows to over CHF 240,000 in 40 years \u2013 without reinvestment, it&#8217;s only CHF 42,000.<\/figcaption><\/figure>\n\n<h3 class=\"wp-block-heading\"><span id=\"The_rule_of_72_compound_interest_for_practical_people\">The rule of 72: compound interest for practical people<\/span><\/h3>\n\n<p class=\"wp-block-paragraph\">If you want to grasp compound interest without a calculator, you can use a simple rule of thumb \u2013 the <strong>rule of 72<\/strong>. It tells you <strong>roughly how many years it takes for your capital to double<\/strong> if you know the annual return:<\/p>\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p class=\"wp-block-paragraph\"><strong>72 \u00f7 return in % = years until your money doubles<\/strong><\/p>\n<\/blockquote>\n\n<p class=\"wp-block-paragraph\">Example:<\/p>\n\n<ul class=\"wp-block-list\">\n<li>At a <strong>6%<\/strong> return, it takes about <strong>12 years<\/strong>,<\/li>\n\n\n\n<li>at <strong>8%<\/strong>, just <strong>9 years<\/strong>.<\/li>\n<\/ul>\n\n<p class=\"wp-block-paragraph\">This simple back-of-the-envelope calculation instantly shows <strong>how big an impact even small differences in return have<\/strong> \u2013 and why investing for the long term pays off. The higher the return or the longer the investment horizon, the more powerful compound interest becomes.<\/p>\n\n<p class=\"wp-block-paragraph\">If you want the exact figures, use our <strong>interactive compound interest calculator<\/strong> below.<\/p>\n\n<h2 class=\"wp-block-heading\"><span id=\"Compound_interest_held_back_6_typical_pitfalls\">Compound interest held back: 6 typical pitfalls<\/span><\/h2>\n\n<h3 class=\"wp-block-heading\"><span id=\"Pitfall_no_1_Our_brain_thinks_linearly\">Pitfall no. 1: Our brain thinks linearly<\/span><\/h3>\n\n<p class=\"wp-block-paragraph\">Evolution has trained us to understand linear developments: step by step, year by year. <strong>A lot of everyday life works linearly<\/strong> \u2013 if I drive for an hour at 60 km\/h, I cover 60 km; if I work twice as many hours, I earn roughly twice as much; if I run 10 km every week, I&#8217;ve covered 100 km after 10 weeks.<\/p>\n\n<p class=\"wp-block-paragraph\">Exponential growth, on the other hand, remains <strong>hard to grasp<\/strong>. A classic example is the <strong>rice on the chessboard<\/strong>: the first square gets one grain, the second two, the third four \u2013 and so on. Halfway across the board, it still looks harmless, but by the end there are over <strong>18 quintillion grains <\/strong>(18,000,000,000,000,000,000) on it \u2013 an almost unimaginable number.<\/p>\n\n<p class=\"wp-block-paragraph\">That&#8217;s exactly why, in our article <a href=\"https:\/\/schweizerfinanzblog.ch\/en\/behavioral-finance-how-to-avoid-the-13-biggest-investment-mistakes\/\" data-type=\"post\" data-id=\"3653\">Behavioral finance: how to avoid the 13 biggest thinking errors when investing<\/a>, we concluded that <strong>underestimating compound interest<\/strong> is probably the biggest investment mistake of all.<\/p>\n\n<h3 class=\"wp-block-heading\"><span id=\"Pitfall_no_2_Too_little_patience\">Pitfall no. 2: Too little patience<\/span><\/h3>\n\n<p class=\"wp-block-paragraph\">The first ten years can be frustrating. Example: if you invest CHF 10,000 at an <strong>8% return<\/strong>, after 10 years you&#8217;ll only have around <strong>CHF 22,000<\/strong> \u2013 a gain of CHF 12,000. After 20 years it&#8217;s <strong>CHF 49,000<\/strong>, after 30 years <strong>CHF 109,000<\/strong>, and after 40 years already <strong>CHF 243,000<\/strong>.<\/p>\n\n<p class=\"wp-block-paragraph\">The key point: the big leverage only comes late. Many people give up before then and would rather spend the money on consumption \u2013 and never tap the full potential.<\/p>\n\n<figure class=\"wp-block-table\"><table class=\"has-fixed-layout\"><tbody><tr><td><strong>Year<\/strong><\/td><td class=\"has-text-align-right\" data-align=\"right\"><strong>Value (CHF)<\/strong><\/td><td class=\"has-text-align-right\" data-align=\"right\"><strong>Increase per 10 years (CHF)<\/strong><\/td><\/tr><tr><td>0<\/td><td class=\"has-text-align-right\" data-align=\"right\">10&#8217;000<\/td><td class=\"has-text-align-right\" data-align=\"right\">0<\/td><\/tr><tr><td>10<\/td><td class=\"has-text-align-right\" data-align=\"right\">22&#8217;196<\/td><td class=\"has-text-align-right\" data-align=\"right\">+12&#8217;196<\/td><\/tr><tr><td>20<\/td><td class=\"has-text-align-right\" data-align=\"right\">49&#8217;268<\/td><td class=\"has-text-align-right\" data-align=\"right\">+27&#8217;072<\/td><\/tr><tr><td>30<\/td><td class=\"has-text-align-right\" data-align=\"right\">109&#8217;357<\/td><td class=\"has-text-align-right\" data-align=\"right\">+60&#8217;089<\/td><\/tr><tr><td>40<\/td><td class=\"has-text-align-right\" data-align=\"right\">242&#8217;734<\/td><td class=\"has-text-align-right\" data-align=\"right\">+133&#8217;377<\/td><\/tr><\/tbody><\/table><figcaption class=\"wp-element-caption\">The table shows four 10-year periods at a constant gross return of 8% p.a. Despite the same length and return, the increase in value grows disproportionately from decade to decade thanks to compound interest.<\/figcaption><\/figure>\n\n<h3 class=\"wp-block-heading\"><span id=\"Pitfall_no_3_Amounts_that_are_too_small\">Pitfall no. 3: Amounts that are too small<\/span><\/h3>\n\n<p class=\"wp-block-paragraph\">If you regularly invest small amounts, you also benefit from compound interest \u2013 but the \u201cwow moment\u201d only comes with higher monthly contributions.<\/p>\n\n<p class=\"wp-block-paragraph\">The mechanism is identical \u2013 but in absolute terms it makes a huge difference whether you end up with a six-figure sum for a bit more security or a seven-figure sum as the basis for financial freedom.<\/p>\n\n<figure class=\"wp-block-image size-full\"><img decoding=\"async\" src=\"https:\/\/schweizerfinanzblog.ch\/wp-content\/uploads\/2025\/09\/Zinseszins_Sparrate_EN.png\" alt=\"Compound interest\" class=\"wp-image-13554\"\/><figcaption class=\"wp-element-caption\">The size of your monthly contribution makes a big difference \u2013 and compound interest delivers the lion&#8217;s share: at 8% p.a., CHF 1,000\/month (480k in total) grows to around CHF 3.5 million in 40 years (compound interest effect compared with contributions alone: approx. CHF 3 million). CHF 200\/month (96k in total) grows to around CHF 698,000 (compound interest effect: approx. CHF 602,000).<\/figcaption><\/figure>\n\n<p class=\"has-text-align-center wp-block-paragraph\"><\/p>\n\n<p class=\"has-text-align-center wp-block-paragraph\"><span style=\"color: #37c392;\"><strong><em>\u2013 P a r t n e r \u00a0 o f f e r \u2013<\/em><\/strong><\/span><\/p>\n\n<p class=\"has-text-align-center wp-block-paragraph\"><em>Regularly investing smaller or larger amounts is the be-all and end-all of building wealth systematically. The easiest way to do this is with an automatic savings plan. Saxo now offers all of its more than 100 savings-plan-eligible ETFs with no purchase commission.<\/em><\/p>\n\n<figure class=\"wp-block-image size-full d-none d-lg-block\"><a class=\"d-none d-lg-block \" href=\"https:\/\/schweizerfinanzblog.ch\/en\/saxo-bank-reviews-informed-and-critical\/\" target=\"_blank\" rel=\" noreferrer noopener\"><img decoding=\"async\" src=\"https:\/\/schweizerfinanzblog.ch\/wp-content\/uploads\/2026\/03\/Saxo_Review-Banner_Desktop_EN_neu.png\" alt=\"\" class=\"wp-image-13437\"\/><\/a><\/figure>\n\n<figure class=\"wp-block-image size-full d-lg-none\"><a class=\"d-lg-none\" href=\"https:\/\/schweizerfinanzblog.ch\/en\/saxo-bank-reviews-informed-and-critical\/\" target=\"_blank\" rel=\" noreferrer noopener\"><img decoding=\"async\" src=\"https:\/\/schweizerfinanzblog.ch\/wp-content\/uploads\/2026\/03\/Saxo_Review-Banner_Mobile_EN_neu.png\" alt=\"\" class=\"wp-image-13440\"\/><\/a><\/figure>\n\n<p class=\"has-text-align-center\"><span style=\"color: #37c392;\">&nbsp;<strong><em><strong><em>\u2013 \u2013 \u2013 \u2013 \u2013<\/em><\/strong><\/em><\/strong><\/span><\/p>\n\n<h3 class=\"wp-block-heading\"><span id=\"Pitfall_no_4_Interruptions\">Pitfall no. 4: Interruptions<\/span><\/h3>\n\n<p class=\"wp-block-paragraph\">If you pull out capital after a few years, you <strong>destroy the compound interest effect<\/strong>. Compounding only works if you make no withdrawals over a long period.<\/p>\n\n<p class=\"wp-block-paragraph\">At an 8% return, CHF 10,000 grows to around <strong>CHF 243,000<\/strong> in 40 years. A single withdrawal of CHF 5,000 after 10 years, however, cuts the final value to just <strong>CHF 188,000<\/strong> \u2013 a loss of <strong>CHF 55,000<\/strong>, caused by an early withdrawal of a mere CHF 5,000.<\/p>\n\n<figure class=\"wp-block-image size-full\"><img decoding=\"async\" src=\"https:\/\/schweizerfinanzblog.ch\/wp-content\/uploads\/2025\/09\/Zinseszins_Entnahmen_EN.png\" alt=\"Compound interest\" class=\"wp-image-13551\"\/><figcaption class=\"wp-element-caption\">A single withdrawal of CHF 5,000 after 10 years reduces your final wealth after 40 years by around CHF 55,000 \u2013 eleven times the amount withdrawn (compounded monthly).<\/figcaption><\/figure>\n\n<h3 class=\"wp-block-heading\"><span id=\"Pitfall_no_5_Emotions_volatility\">Pitfall no. 5: Emotions &amp; volatility<\/span><\/h3>\n\n<p class=\"wp-block-paragraph\">Market swings are unsettling. If you sell in a panic, you rob yourself of the chance of decades of growth.<\/p>\n\n<p class=\"wp-block-paragraph\">One example: in the coronavirus crash of March 2020, the MSCI World lost around <strong>\u201330%<\/strong> within a few weeks. Many investors sold out of fear \u2013 only to watch the markets climb to new record highs a few months later. Those who got out missed exactly the phase in which the biggest gains were made.<\/p>\n\n<p class=\"wp-block-paragraph\">So emotions can destroy the compound interest effect in two ways:<\/p>\n\n<ul class=\"wp-block-list\">\n<li><strong>Panic in a crisis:<\/strong> capital is sold at a loss and is missing when the recovery comes.<\/li>\n\n\n\n<li><strong>Euphoria in boom times:<\/strong> investors buy in at high prices, when the market is already overheated.<\/li>\n<\/ul>\n\n<p class=\"wp-block-paragraph\">The stock market doesn&#8217;t reward the smartest or the fastest, but the <strong>disciplined who stay the course<\/strong>. Investing legend Warren Buffett sums it up: \u201cThe stock market is a device for transferring money from the impatient to the patient.\u201d<\/p>\n\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"1630\" height=\"1038\" src=\"https:\/\/schweizerfinanzblog.ch\/wp-content\/uploads\/2025\/07\/Minderrendite-durch-vorzeitigen-Verkauf.png\" alt=\"Stock market crash\" class=\"wp-image-12956\" srcset=\"https:\/\/schweizerfinanzblog.ch\/wp-content\/uploads\/2025\/07\/Minderrendite-durch-vorzeitigen-Verkauf.png 1630w, https:\/\/schweizerfinanzblog.ch\/wp-content\/uploads\/2025\/07\/Minderrendite-durch-vorzeitigen-Verkauf-768x489.png 768w, https:\/\/schweizerfinanzblog.ch\/wp-content\/uploads\/2025\/07\/Minderrendite-durch-vorzeitigen-Verkauf-1536x978.png 1536w\" sizes=\"auto, (max-width: 1630px) 100vw, 1630px\" \/><figcaption class=\"wp-element-caption\">Panic selling at the coronavirus low (March 2020) and getting back in late misses the rapid recovery \u2013 instead of a gain of around +21%, the result is significantly lower; the gap remains even after reinvesting (for a 60\/40 portfolio \u2013 60% equities, 40% bonds).<\/figcaption><\/figure>\n\n<p class=\"wp-block-paragraph\">For concrete tips on keeping a cool head in turbulent times, see the article: <a href=\"https:\/\/schweizerfinanzblog.ch\/en\/stock-market-crash-guide-how-to-master-market-crises-with-confidence-and-profit-in-the-long-term\/\" target=\"_blank\" data-type=\"post\" data-id=\"12939\" rel=\"noreferrer noopener\">Stock market crash guide: how to handle market crises with confidence and profit in the long run<\/a>.<\/p>\n\n<h4 class=\"wp-block-heading\"><span id=\"Digression_Lombard_loans_double_the_upside_double_the_risk\">Digression: Lombard loans \u2013 double the upside, double the risk<\/span><\/h4>\n\n<p class=\"wp-block-paragraph\">Investors with a bigger appetite for risk, like Toni, have also used Lombard loans as a compound interest booster. They let you amplify returns in upswings \u2013 and buy more at lower prices after market dips. In return, though, the risks are higher: margin calls or even forced sales can turn the effect into its opposite.<\/p>\n\n<p class=\"wp-block-paragraph\">More on this in the article: <a href=\"https:\/\/schweizerfinanzblog.ch\/en\/lombard-loan-when-buying-etfs-a-booster-for-your-return-on-equity-or-playing-with-fire\/\" target=\"_blank\" data-type=\"post\" data-id=\"5022\" rel=\"noreferrer noopener\">Lombard loans for buying ETFs: a booster for your return on equity or playing with fire?<\/a><\/p>\n\n<h3 class=\"wp-block-heading\"><span id=\"Pitfall_no_6_Costs_taxes_inflation_currency_risks\">Pitfall no. 6: Costs, taxes, inflation &amp; currency risks<\/span><\/h3>\n\n<p class=\"wp-block-paragraph\">Compound interest only unfolds its full power if it isn&#8217;t held back by costs, taxes, inflation or currency risks. We take a closer look at these four factors below.<\/p>\n\n<ul class=\"wp-block-list\">\n<li><strong>Fees:<\/strong> an ETF with a <strong>0.1% expense ratio (TER)<\/strong> is vastly superior over the long term to a fund with a 1.5% TER. Over 40 years, this can easily add up to a difference of several hundred thousand francs (see chart below).<\/li>\n\n\n\n<li><strong>Taxes: <\/strong>investors in Switzerland are in a privileged position because <strong>capital gains are tax-free<\/strong>. Only <strong>dividends<\/strong> and <strong>wealth itself<\/strong> are taxed. Find out more about possible tax savings on your investments in the article<strong> <\/strong><a href=\"https:\/\/schweizerfinanzblog.ch\/en\/etf-taxes-switzerland-with-5-tax-saving-tips\/\" target=\"_blank\" data-type=\"post\" data-id=\"3167\" rel=\"noreferrer noopener\">ETF taxes in Switzerland: optimise your portfolio with these 5 tax-saving tips<\/a>.<\/li>\n\n\n\n<li><strong>Inflation:<\/strong> it eats away at purchasing power, but you can&#8217;t control it. In Switzerland, it has historically been much lower than in the US or the eurozone \u2013 usually only <strong>around 1% p.a.<\/strong> That&#8217;s an advantage: nominal returns of 6\u20138% often still mean <strong>5\u20137% real returns<\/strong> here. Even so, over decades even moderate inflation can noticeably reduce purchasing power.<\/li>\n\n\n\n<li><strong>Currency risks: <\/strong>Swiss investors often invest in globally diversified ETFs. This broad diversification pays off in the long run because you benefit from the growth of the global economy. At the same time, however, the <strong>strong Swiss franc<\/strong> can eat into part of the return, because foreign income is worth less when converted into CHF. This dampens the compound interest effect and should be factored into your planning.<\/li>\n<\/ul>\n\n<figure class=\"wp-block-image size-full\"><img decoding=\"async\" src=\"https:\/\/schweizerfinanzblog.ch\/wp-content\/uploads\/2025\/09\/Zinseszins_Kosten_EN.png\" alt=\"Compound interest\" class=\"wp-image-13547\"\/><figcaption class=\"wp-element-caption\">Seemingly small cost differences of 1.4% p.a. have a big effect over the years: with the same starting capital and an 8% gross return, the low-cost ETF portfolio ends up 68%, or around CHF 100,000, ahead of the actively managed solution after 40 years \u2013 the difference ends up with the bank as fees.<\/figcaption><\/figure>\n\n<p class=\"wp-block-paragraph\"><strong>Conclusion: <\/strong>if you really want to make compound interest work for you, go for <strong>low-cost ETFs<\/strong>, optimise for taxes where possible \u2013 and always keep an eye on inflation and currency risks. <\/p>\n\n<h2 class=\"wp-block-heading\"><span id=\"Financial_freedom_needs_compounding\">Financial freedom needs compounding<\/span><\/h2>\n\n<p class=\"wp-block-paragraph\">If you want to achieve financial freedom, there&#8217;s no way around compound interest. Alternatives such as <strong>inheritances<\/strong> or <strong>lottery wins<\/strong> depend on luck \u2013 you can neither plan for them nor rely on them.<\/p>\n\n<p class=\"wp-block-paragraph\">If you want to take matters into your own hands, you need to harness the power of compound interest. You&#8217;ll find more on this in our article <a href=\"https:\/\/schweizerfinanzblog.ch\/en\/financial-freedom-hype-or-a-goal-worth-striving-for\/\" data-type=\"post\" data-id=\"1048\" target=\"_blank\" rel=\"noreferrer noopener\">Financial freedom \u2013 hype or a goal worth pursuing?<\/a><\/p>\n\n<p class=\"wp-block-paragraph\">Albert Einstein is said to have once called compound interest the <strong>\u201ceighth wonder of the world\u201d<\/strong>: \u201cHe who understands it, earns it\u2026 he who doesn&#8217;t, pays it.\u201d<\/p>\n\n<h3 class=\"wp-block-heading\"><span id=\"But_watch_out_reality_isn8217t_linear\">But watch out: reality isn&#8217;t linear<\/span><\/h3>\n\n<p class=\"wp-block-paragraph\">The charts in this article are based on a constant average return \u2013 <strong>8% p.a.<\/strong> in our example. In practice, of course, things don&#8217;t run that smoothly:<\/p>\n\n<ul class=\"wp-block-list\">\n<li>Some years bring +20% or more.<\/li>\n\n\n\n<li>Other years end at -10% or even -30%.<\/li>\n\n\n\n<li>Only over longer periods does the effect smooth out.<\/li>\n<\/ul>\n\n<h3 class=\"wp-block-heading H3\"><span id=\"Is_8_even_realistic\">Is 8% even realistic?<\/span><\/h3>\n\n<p class=\"wp-block-paragraph\">The figure isn&#8217;t pulled out of thin air:<\/p>\n\n<ul class=\"wp-block-list\">\n<li>Over the last 100 years, the <strong>S&amp;P 500<\/strong> has returned around <strong>10% a year nominally<\/strong> on average. After inflation, that leaves around <strong>6\u20137% in real terms<\/strong>.<\/li>\n\n\n\n<li>In recent decades, the <strong>MSCI World<\/strong> has delivered around <strong>7\u20139% nominally<\/strong>, i.e. <strong>4\u20136% in real terms<\/strong>.<\/li>\n\n\n\n<li>The <strong>SPI<\/strong> (Swiss stock market) is also in this range over the long term, albeit slightly lower.<\/li>\n<\/ul>\n\n<p class=\"wp-block-paragraph\"><strong>Important:<\/strong> our example calculations at 8% are <strong>nominal<\/strong> \u2013 taxes, fees and inflation are not taken into account.<\/p>\n\n<h2 class=\"wp-block-heading\"><span id=\"Investment_vehicles_for_compound_interest\">Investment vehicles for compound interest<\/span><\/h2>\n\n<p class=\"wp-block-paragraph\">Compound interest relies on returns not being spent but consistently reinvested. Only then can the snowball effect build up over the long term. The following overview shows which types of investment are particularly well suited for this \u2013 and which are less so.<\/p>\n\n<link rel=\"stylesheet\" href=\"https:\/\/schweizerfinanzblog.ch\/wp-content\/themes\/schweizerfinanzblog\/components\/advantages-and-disadvantages\/advantages-and-disadvantages.css\">\n\n<div id=\"sQtndoF\" class=\"advantages-and-disadvantages grey-advantages\">\n\t<p class='advantages-title'>\n\t\tInvestments with (+) and without (-) a compound interest effect\t<\/p>\n\t\n\t<div class=''>\t\n\t\t<div class=\"row\">\n\n\t\t\t\t\t\t<div class=\"col-12 mb-3\">\n\t\t\t\t<div class=\"advantages\" style=\"background: #f9f9fa; border:1px solid #f0f0f2;\">\n\t\t\t\t\t\t\t\t\t\t<div class=\"advantage d-flex\">\n\t\t\t\t\t\t<img decoding=\"async\" src=\"https:\/\/schweizerfinanzblog.ch\/wp-content\/themes\/schweizerfinanzblog\/components\/advantages-and-disadvantages\/assets\/advantages.svg\"> Accumulating equity ETFs or index funds: dividends are reinvested automatically \u2013 ideal for compounding.\t\t\t\t\t<\/div>\n\t\t\t\t\t\t\t\t\t\t<div class=\"advantage d-flex\">\n\t\t\t\t\t\t<img decoding=\"async\" src=\"https:\/\/schweizerfinanzblog.ch\/wp-content\/themes\/schweizerfinanzblog\/components\/advantages-and-disadvantages\/assets\/advantages.svg\"> Distributing equity ETFs or index funds: compound interest always works on price gains. Dividends only boost it if you reinvest them manually.\t\t\t\t\t<\/div>\n\t\t\t\t\t\t\t\t\t\t<div class=\"advantage d-flex\">\n\t\t\t\t\t\t<img decoding=\"async\" src=\"https:\/\/schweizerfinanzblog.ch\/wp-content\/themes\/schweizerfinanzblog\/components\/advantages-and-disadvantages\/assets\/advantages.svg\"> Individual stocks: compounding through price gains. Dividends only count if reinvested, plus concentration risk up to and including a total loss.\t\t\t\t\t<\/div>\n\t\t\t\t\t\t\t\t\t\t<div class=\"advantage d-flex\">\n\t\t\t\t\t\t<img decoding=\"async\" src=\"https:\/\/schweizerfinanzblog.ch\/wp-content\/themes\/schweizerfinanzblog\/components\/advantages-and-disadvantages\/assets\/advantages.svg\"> Real estate funds: rental income is reinvested or distributed. Reinvesting increases the effect.\t\t\t\t\t<\/div>\n\t\t\t\t\t\t\t\t\t\t<div class=\"advantage d-flex\">\n\t\t\t\t\t\t<img decoding=\"async\" src=\"https:\/\/schweizerfinanzblog.ch\/wp-content\/themes\/schweizerfinanzblog\/components\/advantages-and-disadvantages\/assets\/advantages.svg\"> Bonds: interest coupons can be reinvested, but the effect remains much weaker because of low yields.\t\t\t\t\t<\/div>\n\t\t\t\t\t\t\t\t\t\t<div class=\"advantage d-flex\">\n\t\t\t\t\t\t<img decoding=\"async\" src=\"https:\/\/schweizerfinanzblog.ch\/wp-content\/themes\/schweizerfinanzblog\/components\/advantages-and-disadvantages\/assets\/advantages.svg\"> P2P loans \/ crowdinvesting (platform-based lending and equity models): compound interest arises when repayments are reinvested. Strong in theory, but risky in practice due to defaults, illiquidity and platform risks.\t\t\t\t\t<\/div>\n\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t<\/div>\n\t\t\t\t\t\t\t\t\t<div class=\"col-12\">\n\t\t\t\t<div class=\"disadvantages\" style=\"background: #f9f9fa; border:1px solid #f0f0f2;\">\n\t\t\t\t\t\t\t\t\t\t<div class=\"disadvantage d-flex\">\n\t\t\t\t\t\t<img decoding=\"async\" src=\"https:\/\/schweizerfinanzblog.ch\/wp-content\/themes\/schweizerfinanzblog\/components\/advantages-and-disadvantages\/assets\/disadvantage.svg\"> Bank account \/ savings account: little or no interest, effect practically negligible\t\t\t\t\t<\/div>\n\t\t\t\t\t\t\t\t\t\t<div class=\"disadvantage d-flex\">\n\t\t\t\t\t\t<img decoding=\"async\" src=\"https:\/\/schweizerfinanzblog.ch\/wp-content\/themes\/schweizerfinanzblog\/components\/advantages-and-disadvantages\/assets\/disadvantage.svg\"> Gold: no ongoing income, only price movements. Since no value is created, there&#8217;s no compound interest effect.\t\t\t\t\t<\/div>\n\t\t\t\t\t\t\t\t\t\t<div class=\"disadvantage d-flex\">\n\t\t\t\t\t\t<img decoding=\"async\" src=\"https:\/\/schweizerfinanzblog.ch\/wp-content\/themes\/schweizerfinanzblog\/components\/advantages-and-disadvantages\/assets\/disadvantage.svg\"> Bitcoin &#038; crypto: no income either, only price movements. Unlike with stocks, price increases don&#8217;t automatically raise the basis for future income \u2013 they remain pure paper gains. That&#8217;s why there&#8217;s no real compound interest effect here.\t\t\t\t\t<\/div>\n\t\t\t\t\t\t\t\t\t\t<div class=\"disadvantage d-flex\">\n\t\t\t\t\t\t<img decoding=\"async\" src=\"https:\/\/schweizerfinanzblog.ch\/wp-content\/themes\/schweizerfinanzblog\/components\/advantages-and-disadvantages\/assets\/disadvantage.svg\"> Collectibles (e.g. art, classic cars, watches, wine): no ongoing income either; gains in value can only be realised by selling. Markets are often illiquid and transaction costs high \u2013 no real compound interest effect.\t\t\t\t\t<\/div>\n\t\t\t\t\t\t\t\t\t\t<div class=\"disadvantage d-flex\">\n\t\t\t\t\t\t<img decoding=\"async\" src=\"https:\/\/schweizerfinanzblog.ch\/wp-content\/themes\/schweizerfinanzblog\/components\/advantages-and-disadvantages\/assets\/disadvantage.svg\"> Consumer goods: loss of value instead of return, negative compounding effect\t\t\t\t\t<\/div>\n\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t<\/div>\n\t\n<\/div>\n\n<p class=\"wp-block-paragraph\">For more on particularly convincing equity ETFs, see our big comparison <a href=\"https:\/\/schweizerfinanzblog.ch\/en\/best-etfs-switzerland-and-global\/\" data-type=\"post\" data-id=\"3357\" target=\"_blank\" rel=\"noreferrer noopener\">Best ETFs in Switzerland and worldwide 2025: And the winner is\u2026<\/a><\/p>\n\n<h2 class=\"wp-block-heading\"><span id=\"Try_it_yourself_our_compound_interest_calculator\">Try it yourself: our compound interest calculator<\/span><\/h2>\n\n<p class=\"wp-block-paragraph\">Theory is one thing \u2013 it gets even more exciting when you can plug in <strong>your own numbers<\/strong>: starting capital, monthly contribution, expected return, investment horizon.<\/p>\n\n<p class=\"wp-block-paragraph\">That&#8217;s exactly why we built our <strong>compound interest calculator<\/strong>. It shows you instantly:<\/p>\n\n<ul class=\"wp-block-list\">\n<li>how much your capital can grow to in 10, 20 or 40 years,<\/li>\n\n\n\n<li>how strongly even small changes in return or monthly contribution make a difference,<\/li>\n\n\n\n<li>and how much patience really matters.<\/li>\n<\/ul>\n\n<p class=\"wp-block-paragraph\">Here&#8217;s the compound interest calculator:\u00a0<\/p>\n\n<link rel=\"stylesheet\" href=\"https:\/\/schweizerfinanzblog.ch\/wp-content\/themes\/schweizerfinanzblog\/components\/compound-interest-calculator-component\/compound-interest-calculator-component.css?v=1\">\n\n\n<div class=\"zinseszinsrechner-component \">\n    <div class=\"zinseszinsrechner-content-text mb-5\">\n        <h2 class=\"mb-4\"><\/h2>\n       \t<div>\n\t\t\t\t\t<\/div>\n    <\/div>\n    <div class=\"zinseszinsrechner-content\">\n        <div class=\"zinseszinsrechner-form\">\n            <div class=\"zinseszinsrechner-form-title\">\n                <p>Compound interest calculator<span class=\"money-icon\">\ud83d\ude80<\/span><\/p>\n            <\/div>\n            <div action=\"\" id=\"compoundForm\">\n                <div class=\"mb-3\">\n                    <label for=\"anfangskapital\" class=\"form-label d-flex align-items-center\">Start-up capital                        <div class=\"tooltip-icon ms-3\" data-bs-toggle=\"tooltip\" data-bs-placement=\"bottom\" title=\"This is how much you have already saved or invested.\">\n                            <span class=\"question-mark\">?<\/span>\n                        <\/div>\n                    <\/label>\n\t\t\t\t\t<div class=\"position-relative\">\n\t\t\t\t\t\t<input type=\"text\" class=\"form-control form-control-lg\" id=\"anfangskapital\"\n\t\t\t\t\t\t\t   placeholder=\"5.000\" value=\"5000\" oninput=\"formatNumber(this)\">\n\t\t\t\t\t\t<span class=\"input-sufix\">CHF<\/span>\n\t\t\t\t\t<\/div>\n                <\/div>\n                <div class=\"mb-3\">\n                    <label for=\"monatliche\" class=\"form-label d-flex align-items-center\">Monthly installment                        <div class=\"tooltip-icon ms-3\" data-bs-toggle=\"tooltip\" data-bs-placement=\"bottom\" title=\"This is how much you want to save or invest each month.\">\n                            <span class=\"question-mark\">?<\/span>\n                        <\/div>\n                    <\/label>\n\t\t\t\t\t<div class=\"position-relative\">\n\t\t\t\t\t\t<input type=\"text\" class=\"form-control form-control-lg\" id=\"monatliche\"\n\t\t\t\t\t\t\t   placeholder=\"100\"  value=\"100\" oninput=\"formatNumber(this)\" oninput=\"formatNumber(this)\">\n\t\t\t\t\t\t<span class=\"input-sufix\">CHF<\/span>\n\t\t\t\t\t<\/div>\n                <\/div>\n                <div class=\"mb-3\">\n                    <label for=\"spardauer\" class=\"form-label d-flex align-items-center\">Duration                        <div class=\"tooltip-icon ms-3\" data-bs-toggle=\"tooltip\" data-bs-placement=\"bottom\" title=\"That's how long you want to save or invest.\">\n                            <span class=\"question-mark\">?<\/span>\n                        <\/div>\n                    <\/label>\n\t\t\t\t\t<div class=\"position-relative\">\n\t\t\t\t\t\t<input type=\"text\" class=\"form-control form-control-lg\"\n\t\t\t\t\t\t\t   id=\"spardauer\" placeholder=\"10\"  value=\"10\" oninput=\"formatNumber(this)\">\n\t\t\t\t\t\t<span class=\"input-sufix\">years<\/span>\n\t\t\t\t\t<\/div>\n                <\/div>\n                <div class=\"mb-3\">\n                    <label for=\"zinssatz\" class=\"form-label d-flex align-items-center\">Annual interest rate or yield                        <div class=\"tooltip-icon ms-3\" data-bs-toggle=\"tooltip\" data-bs-placement=\"bottom\" title=\"In the case of shares, the annual return or total return consists of price gains and dividends.\">\n                            <span class=\"question-mark\">?<\/span>\n                        <\/div>\n                    <\/label>\n\t\t\t\t\t<div class=\"position-relative\">\n\t\t\t\t\t\t<input type=\"text\" class=\"form-control form-control-lg\" id=\"zinssatz\"\n\t\t\t\t\t\t\t   placeholder=\"5\" value=\"5\" oninput=\"formatNumber(this)\">\n\t\t\t\t\t\t<span class=\"input-sufix\">%<\/span>\n\t\t\t\t\t<\/div>\n                <\/div>\n                <button id=\"submitButton\" class=\"btn btn-primary w-100\">Calculate<\/button>\n            <\/div>\n\n        <\/div>\n    <\/div>\n\t\n\t\n\t<div id=\"diagramWrapper\" class=\"diagram-wrapper d-none mt-5\">\n\t\t<h3 class=\"diagram-title\"><span id=\"Calculation\">\n\t\t\tCalculation\t\t<\/span><\/h3>\n\t\t\n\t\t<div class=\"d-flex justify-content-between flex-column flex-lg-row mb-2\">\n\t\t\t<div class=\"d-flex\">\n\t\t\t\t<span class=\"diagram-bolder-text\">Final capital<\/span> \n\t\t\t\t<div class=\"tooltip-icon ms-3\" data-bs-toggle=\"tooltip\" data-bs-placement=\"bottom\" title=\"The sum of the starting capital, all deposits and the accumulated interest or income from capital gains and dividends\">\n\t\t\t\t\t<span class=\"question-mark\">?<\/span>\n\t\t\t\t<\/div>\n\t\t\t<\/div>\n\t\t\t<span class=\"diagram-bolder-text\" id=\"total\"><\/span>\n\t\t<\/div>\n\t\t<div class=\"d-flex justify-content-between flex-column flex-lg-row mb-2\">\n\t\t\t<div class=\"d-flex\">\n\t\t\t\t<span class=\"diagram-bolder-text\">Total deposits<\/span>\n\t\t\t\t<div class=\"tooltip-icon ms-3\" data-bs-toggle=\"tooltip\" data-bs-placement=\"bottom\" title=\"The sum of all savings or investment rates\">\n\t\t\t\t\t<span class=\"question-mark\">?<\/span>\n\t\t\t\t<\/div>\n\t\t\t<\/div>\n\t\t\t<span class=\"diagram-bolder-text\" id=\"deposits\"><\/span>\n\t\t<\/div>\n\t\t<div class=\"d-flex justify-content-between flex-column flex-lg-row mb-2\">\n\t\t\t<div class=\"d-flex\">\n\t\t\t\t<span class=\"diagram-bolder-text\">Total interest or total income<\/span>\n\t\t\t\t<div class=\"tooltip-icon ms-3\" data-bs-toggle=\"tooltip\" data-bs-placement=\"bottom\" title=\"All interest or income from capital gains and dividends\">\n\t\t\t\t\t<span class=\"question-mark\">?<\/span>\n\t\t\t\t<\/div>\n\t\t\t<\/div>\n\t\t\t<span class=\"diagram-bolder-text\" id=\"paymentReceived\"><\/span>\n\t\t<\/div>\n\t\t\n\t\t<p>\n\t\t\tIf you have <span class=\"fw-bold\"><span id=\"yearsText\">10 years<\/span>, <span id=\"months\">monthly<\/span> <span id=\"monthlyPrice\">100CHF<\/span> to <span id=\"annual\">5%<\/span><\/span> invest, your <span class=\"fw-bold\">Final capital <span id=\"finalCapital\">23.763CHF<\/span><\/span>. This is made up of <span class=\"fw-bold\"><span id=\"totalDeposit\">17.000CHF<\/span> Deposits <\/span> and <span class=\"fw-bold\"><span id=\"paymentReceivedText\">6.763CHF<\/span> Interest<\/span> or investment income.\t\t<\/p>\n\t\t\n\t\t\n\t\t<div class=\"horizontal-line\">\n\t\t\t\n\t\t<\/div>\n\t\t\n\t\t<h3  class=\"diagram-title\"><span id=\"Diagram\">\n\t\t\tDiagram\t\t<\/span><\/h3>\n\t\t <div class=\"chart-wrapper\"> \n            <canvas id=\"stackedChartID\"><\/canvas> \n        <\/div> \n\t<\/div>\n<\/div>\n   <script src= \"https:\/\/ajax.googleapis.com\/ajax\/libs\/jquery\/3.6.1\/jquery.min.js\"> \n    <\/script> \n    <script src= \"https:\/\/cdn.jsdelivr.net\/npm\/chart.js@4.0.1\/dist\/chart.umd.min.js\"> \n    <\/script> \n\n<script>\n\n\tlet initialCapital =document.querySelector('#anfangskapital');\n\tlet monthlySavings = document.querySelector('#monatliche');\n\tlet investmentPeriod = document.querySelector('#spardauer');\n\tlet annualInterestRate = document.querySelector('#zinssatz');\n\tlet payoutInterval =  12\/\/document.querySelector('#selectAussch\u00fcttungsintervall');\n\t\n\tlet tooltipelements = document.querySelectorAll(\"[data-bs-toggle='tooltip']\");\n\t\n\t\n\tdocument.addEventListener('DOMContentLoaded', ()=>{\n\t\ttooltipelements.forEach((el) => {\n\t\t\tnew bootstrap.Tooltip(el);\n\t\t});\n\t\tdocument.querySelector('#submitButton').addEventListener('click', function(event) {\t\t\n\t\t\tevent.preventDefault();\n\t\t\tevent.stopPropagation();\n\n\n\t\t\tlet initialCapitalValue =  parseFloat(initialCapital.value.replace(\/\\'\/g, ''));\n\t\t\tlet monthlySavingsValue = parseFloat(monthlySavings.value.replace(\/\\'\/g, ''));\n\t\t\tlet investmentPeriodValue = parseFloat(investmentPeriod.value.replace(\/\\'\/g, ''));\n\t\t\tlet annualInterestRateValue = parseFloat(annualInterestRate.value.replace(\/\\'\/g, ''));\n\t\t\tlet payoutIntervalValue = parseFloat(payoutInterval);\n\n\n\t\t\tvar futureValue = compoundInterest(initialCapitalValue, monthlySavingsValue, investmentPeriodValue, annualInterestRateValue, payoutIntervalValue);\n\n\t\t\tvar totalDeposits = calculateTotalDeposits(initialCapitalValue, monthlySavingsValue, investmentPeriodValue * payoutIntervalValue);\n\t\t\tvar interestPaymentsReceived = calculateInterestPaymentsReceived(initialCapitalValue, monthlySavingsValue, investmentPeriodValue, annualInterestRateValue, payoutIntervalValue);\n\n\n\t\t\tcreateChart(initialCapitalValue, monthlySavingsValue, annualInterestRateValue, payoutIntervalValue, investmentPeriodValue);\n\n\t\t\tdocument.querySelector(\"#yearsText\").innerText = investmentPeriodValue + \" years\";\n\n\t\t\tif(payoutInterval.value == 12){\n\t\t\t\tdocument.querySelector(\"#months\").innerText = \"monthly\";\t\n\t\t\t}else if(payoutInterval == 4){\n\t\t\t\tdocument.querySelector(\"#months\").innerText = \"quarterly\";\t\n\t\t\t}else{\n\t\t\t\tdocument.querySelector(\"#months\").innerText = \"yearly\";\t\n\t\t\t}\n\n\t\t\tdocument.querySelector(\"#monthlyPrice\").innerText = monthlySavingsValue.toLocaleString('en-US').replace(\/,\/g, '\\'') + \" CHF\";\n\t\t\tdocument.querySelector(\"#annual\").innerText = annualInterestRateValue + \"%\";\n\t\t\tdocument.querySelector(\"#finalCapital\").innerText =  parseInt(futureValue.toFixed()).toLocaleString('en-US').replace(\/,\/g, '\\'') + \" CHF\";\n\t\t\tdocument.querySelector(\"#totalDeposit\").innerText =  totalDeposits.toLocaleString('en-US').replace(\/,\/g, '\\'') + \" CHF\";\n\t\t\tdocument.querySelector(\"#paymentReceivedText\").innerText =  parseInt(interestPaymentsReceived.toFixed()).toLocaleString('en-US').replace(\/,\/g, '\\'') + \" CHF\";\n\n\n\t\t\tdocument.querySelector('#diagramWrapper').classList.remove(\"d-none\");\n\t\t\tdocument.querySelector('#paymentReceived').innerText  =  parseInt(interestPaymentsReceived.toFixed()).toLocaleString('en-US').replace(\/,\/g, '\\'') + \" CHF\";\n\t\t\tdocument.querySelector('#deposits').innerText  =  totalDeposits.toLocaleString('en-US').replace(\/,\/g, '\\'') + \" CHF\";\n\t\t\tdocument.querySelector('#total').innerText  =  parseInt(futureValue.toFixed()).toLocaleString('en-US').replace(\/,\/g, '\\'') + \" CHF\"\n\n\t\t\treturn false;\n\t\t})\n\t}, false);\n\t\n\t\n\n\tfunction compoundInterest(P, M, t, r, n) {\n\t\tr = r \/ 100;\n\t\tvar N = n * t;\n\t\tvar compoundInitial = P * Math.pow(1 + r \/ n, N);\n\t\tvar compoundMonthly = M * ((Math.pow(1 + r \/ n, N) - 1) \/ (r \/ n));\n\t\treturn A = compoundInitial + compoundMonthly;\n\t\t\n\t}\n\t\n\tfunction calculateTotalDeposits(initialCapital, monthlySavings, numberOfMonths) {\n\t\treturn initialCapital + (monthlySavings * numberOfMonths);\n\t}\n\n\tfunction calculateInterestPaymentsReceived(initialCapital, monthlySavings, investmentPeriod, annualInterestRate, payoutInterval) {\n\t\tvar N = payoutInterval * investmentPeriod;\n\t\tvar compoundInitial = initialCapital * Math.pow(1 + annualInterestRate \/ payoutInterval \/ 100, N);\n\t\tvar compoundMonthly = monthlySavings * ((Math.pow(1 + annualInterestRate \/ payoutInterval \/ 100, N) - 1) \/ (annualInterestRate \/ payoutInterval \/ 100));\n\t\tvar totalFutureValue = compoundInitial + compoundMonthly;\n\t\tvar totalDeposits = calculateTotalDeposits(initialCapital, monthlySavings, N);\n\t\treturn totalFutureValue - totalDeposits;\n\t}\n\t\n\tfunction calculateInterestPaymentsReceivedMonthly(initialCapital, monthlySavings, investmentPeriodInMonths, annualInterestRate, payoutInterval) {\n\t\tvar monthlyInterestRate = annualInterestRate \/ 12 \/ 100; \n\t\tvar N = payoutInterval * investmentPeriodInMonths; \n\t\tvar compoundInitial = initialCapital * Math.pow(1 + monthlyInterestRate, N);\n\t\tvar compoundMonthly = monthlySavings * ((Math.pow(1 + monthlyInterestRate, N) - 1) \/ monthlyInterestRate);\n\t\tvar totalFutureValue = compoundInitial + compoundMonthly;\n\t\tvar totalDeposits = calculateTotalDeposits(initialCapital, monthlySavings, investmentPeriodInMonths \/ 12); \n\t\treturn totalFutureValue - totalDeposits;\n\t}\n\n\t function createChart(initialCapitalVal, monthlySavingsVal, annualInterestRateVal, payoutIntervalVal, investmentPeriodVal){\n\t\t var myContext = document.getElementById(\"stackedChartID\").getContext('2d'); \n  \n\t\t let deposits = [];\n\t\t let paymentsReceiver = [];\n\t\t let period = [];\n\t\tif(investmentPeriodVal>2){\n\t\t\t for(let year = 1; year<=investmentPeriodVal; year++){\n\t\t\t\t period.push(year)\n\t\t\t\t deposits.push(calculateTotalDeposits(initialCapitalVal, monthlySavingsVal, year * payoutIntervalVal).toFixed() );\n\t\t\t\t paymentsReceiver.push( calculateInterestPaymentsReceived(initialCapitalVal, monthlySavingsVal, year, annualInterestRateVal, payoutIntervalVal).toFixed() )\n\t\t\t }\n\t\t}else{\n\t\t\tfor(let month = 1; month<=investmentPeriodVal*12; month++){\n\t\t\t\t period.push(month)\n\t\t\t\t deposits.push(calculateTotalDeposits(initialCapitalVal, monthlySavingsVal, month\/12 * payoutIntervalVal).toFixed() );\n\t\t\t\t paymentsReceiver.push( calculateInterestPaymentsReceivedMonthly(initialCapitalVal, monthlySavingsVal, month, annualInterestRateVal, payoutIntervalVal).toFixed() )\n\t\t\t}\n\t\t}\n\n\t\tlet chartStatus = Chart.getChart(\"stackedChartID\"); \/\/ <canvas> id\n\t\tif (chartStatus != undefined) {\n\t\t  chartStatus.destroy();\n\t\t}\n\t\t \n\t\t var myChart = new Chart(myContext, { \n\t\t\t type: 'bar', \n\t\t\t height:400,\n\t\t\t data: { \n\t\t\t\t labels: period, \n\t\t\t\t datasets: [{ \n\t\t\t\t\t label: 'Deposits', \n\t\t\t\t\t backgroundColor: \"gray\", \n\t\t\t\t\t data: deposits, \n\t\t\t\t\t stack: 'Stack 0', \n\t\t\t\t }, { \n\t\t\t\t\t label: 'Interest', \n\t\t\t\t\t backgroundColor: \"#36c591\", \n\t\t\t\t\t data: paymentsReceiver, \n\t\t\t\t\t stack: 'Stack 0', \n\t\t\t\t }], \n\t\t\t }, \n\t\t\t options: { \n\t\t\t\t maintainAspectRatio: false,\n\t\t\t\t interaction: { \n\t\t\t\t\t intersect: false, \n\t\t\t\t }, \n\t\t\t\t scales: { \n\t\t\t\t\t x: { \n\t\t\t\t\t\t stacked: true,  \/\/ prvo stacked\n\t\t\t\t\t\t title: {\n\t\t\t\t\t\t\t display: true,\n\t\t\t\t\t\t\t text: 'years'\n\t\t\t\t\t\t },\n\t\t\t\t\t },\n\t\t\t\t\t y: { \n\t\t\t\t\t\t stacked: true,\n\t\t\t\t\t\t title: {\n\t\t\t\t\t\t\t display: true,\n\t\t\t\t\t\t\t text: 'Total capital'\n\t\t\t\t\t\t }\n\t\t\t\t\t } \n\t\t\t\t }, \n\t\t\t\t responsive: true \n\t\t\t }\n\t\t }); \n\t }\n\n\t\n\t  function formatNumber(el) {\n\t\t  \n      var inputValue = el.value;\n\n      var numericValue = parseFloat(inputValue.replace(\/\\'\/g, ''));\n\n\n      if (!isNaN(numericValue)) {\n        var str =  numericValue.toLocaleString('en-US');\n        var formattedValue =str.replace(\/,\/g, '\\'');\n\n         el.value = formattedValue;\n      }\n    }\n    <\/script> \n<h2 class=\"wp-block-heading\"><span id=\"The_ingredients_have_to_work_together\">The ingredients have to work together<\/span><\/h2>\n\n<p class=\"wp-block-paragraph\">Compound interest is powerful \u2013 but only if several factors work <strong>together<\/strong>. A single ingredient isn&#8217;t enough:<\/p>\n\n<ul class=\"wp-block-list\">\n<li><strong>Lots of patience:<\/strong> the effect takes time to become visible. Only with an investment horizon of <strong>more than 10 years<\/strong> does the snowball start rolling, picking up speed with every year.<\/li>\n\n\n\n<li><strong>A meaningful savings rate:<\/strong> as a rule of thumb, <strong>at least 10% of your income<\/strong>. If your income rises, you should let your <strong>monthly contribution grow in absolute terms<\/strong> too \u2013 or, even more effectively, <strong>raise the savings rate itself<\/strong>, e.g. to 15% or more.<\/li>\n\n\n\n<li><strong>A high-return investment:<\/strong> historically, <strong>equities<\/strong> have proven to be by far the most attractive asset class. Best suited are <strong>low-cost equity ETFs on global indices<\/strong> such as MSCI World or FTSE All-World.<\/li>\n<\/ul>\n\n<p class=\"wp-block-paragraph\">A prime example is <strong>Warren Buffett<\/strong>: he bought his first stock at the tender age of 11. Today he is one of the richest people in the world. The remarkable thing: around <strong>99% of his current wealth<\/strong> (over USD 100 billion) was created <strong>only after his 50th birthday<\/strong> \u2013 thanks to lots of patience, steady investing and <strong>compounding, i.e. the compound interest effect<\/strong>.<\/p>\n\n<p class=\"wp-block-paragraph\"><strong>Important for anyone who doesn&#8217;t want to or can&#8217;t spend 40 years building wealth before (early) retirement:<\/strong> compound interest also works over shorter periods. From around 10 years on, things pick up speed. With a horizon of 10 or 20 years, you can also reach considerable sums with <strong>high starting capital<\/strong> <strong>and\/or high monthly contributions<\/strong>.<\/p>\n\n<p class=\"wp-block-paragraph\">An example with an <strong>8% return over 15 years<\/strong>:<\/p>\n\n<ul class=\"wp-block-list\">\n<li>Starting with <strong>CHF 200,000<\/strong> leads to a final value of approx. <strong>CHF 661,000<\/strong><\/li>\n\n\n\n<li>Starting with <strong>CHF 100,000 + CHF 1,000\/month<\/strong> leads to a final value of approx. <strong>CHF 676,000<\/strong><\/li>\n<\/ul>\n\n<h2 class=\"wp-block-heading\"><span id=\"And_what_happens_once_you8217ve_reached_your_goal\">And what happens once you&#8217;ve reached your goal?<\/span><\/h2>\n\n<p class=\"wp-block-paragraph\">Compound interest shows its full strength while you&#8217;re building up your wealth. But at some point you reach the stage where it&#8217;s no longer about saving and investing, but about <strong>living off the capital you&#8217;ve built<\/strong>.<\/p>\n\n<p class=\"wp-block-paragraph\">A frequently cited rule of thumb is the <strong>4% rule<\/strong>: if you withdraw 4% of your invested assets each year, statistically you shouldn&#8217;t run the risk of running out of money early, even over 30 years. It&#8217;s a useful starting point, but no substitute for individual planning.<\/p>\n\n<p class=\"wp-block-paragraph\">Because <strong>reality is more complex<\/strong>:<\/p>\n\n<ul class=\"wp-block-list\">\n<li><strong>Market phases never run in a straight line.<\/strong> A stock market crash can be especially dangerous in the first years of the withdrawal phase (known as sequence-of-returns risk).<\/li>\n\n\n\n<li><strong>Your personal situation matters.<\/strong> Taxes, living costs or additional income such as AHV and BVG pensions have a major influence.<\/li>\n\n\n\n<li><strong>Flexibility increases security.<\/strong> If you reduce or postpone your withdrawals in bad stock market years, you lower the risk of using up your capital too early.<\/li>\n<\/ul>\n\n<p class=\"wp-block-paragraph\">Find out more in our article <a href=\"https:\/\/schweizerfinanzblog.ch\/en\/bester-entnahmeplan-fuer-deine-fruehrente\/\" target=\"_blank\" data-type=\"post\" data-id=\"4032\" rel=\"noreferrer noopener\">Withdrawal plans: how to retire early and stress-free<\/a>.<\/p>\n\n<h2 class=\"wp-block-heading\"><span id=\"Updates\">Updates<\/span><\/h2>\n\n<p class=\"wp-block-paragraph\">2025-11-06: added an explanation of the rule of 72 as an easy way to calculate the compound interest effect. <\/p>\n\n<h2 class=\"wp-block-heading\"><span id=\"Disclaimer\">Disclaimer<\/span><\/h2>\n\n<p class=\"wp-block-paragraph\"><strong>Disclaimer: <\/strong>investing involves the risk of loss. You have to decide for yourself whether or not you want to take on these risks.<\/p>\n\n<p class=\"wp-block-paragraph\"><strong>Errors excepted:<\/strong> we have written this article on the magical power of compound interest to the best of our knowledge and belief. Our goal is to give you, as a private investor, information on finance that is as objective and meaningful as possible. If we have nevertheless made mistakes, or if important aspects have been forgotten and\/or are no longer up to date, we would be grateful if you let us know.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>We&#8217;ve written about compound interest on this blog many times. But in conversations we keep noticing the same thing: even very smart people can barely imagine the power behind it. We catch ourselves thinking linearly too \u2013 exponential growth stays abstract. High time to take a closer look: why do most people never experience the [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":13489,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"footnotes":""},"categories":[181,200,180],"tags":[],"class_list":["post-13627","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-financial-freedom","category-financial-psychology","category-investment-strategy"],"acf":[],"_links":{"self":[{"href":"https:\/\/schweizerfinanzblog.ch\/en\/wp-json\/wp\/v2\/posts\/13627","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/schweizerfinanzblog.ch\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/schweizerfinanzblog.ch\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/schweizerfinanzblog.ch\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/schweizerfinanzblog.ch\/en\/wp-json\/wp\/v2\/comments?post=13627"}],"version-history":[{"count":9,"href":"https:\/\/schweizerfinanzblog.ch\/en\/wp-json\/wp\/v2\/posts\/13627\/revisions"}],"predecessor-version":[{"id":18863,"href":"https:\/\/schweizerfinanzblog.ch\/en\/wp-json\/wp\/v2\/posts\/13627\/revisions\/18863"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/schweizerfinanzblog.ch\/en\/wp-json\/wp\/v2\/media\/13489"}],"wp:attachment":[{"href":"https:\/\/schweizerfinanzblog.ch\/en\/wp-json\/wp\/v2\/media?parent=13627"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/schweizerfinanzblog.ch\/en\/wp-json\/wp\/v2\/categories?post=13627"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/schweizerfinanzblog.ch\/en\/wp-json\/wp\/v2\/tags?post=13627"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}