Compound growth: A powerful argument for investing long term

This Is Money
Investing over many years eventually reaches a ‘tipping point’ where your returns double what you’ve put in to date, highlights new research from Interactive Investor.

In a powerful argument for investing long term, compound growth can account for an ever larger share of your portfolio or pension fund over the years.


Putting £250 per month into investments returning 5 per cent a year would see a gain of £83 on your £3,000 total contributions, or 3 per cent, in year one.

This means that your returns after that year would represent just a small percentage of the total pot.

But by year 10, the power of compounding would mean the portion delivered by investment growth would make up 30 per cent of the overall portfolio, and by year 20 it would be 72 per cent.
At year 26 it would hit 105 per cent – with a pot containing £78,000 worth of your monthly contributions over the period now worth £160,229.

Then you’ve reached the tipping point where your returns double what you’ve put in.

If you paid in the same amount but achieved an annual investment return of 7 per cent, it would take 18 years to reach the investment ‘tipping point’, calculates ii.