Periodic Contribution

Periodic contributions combined with compound interest are the foundation of long-term investing. Record and project your contributions in Index Balance.

Definition

A periodic contribution is the amount of money invested on a regular basis (monthly, quarterly, or annually) into the portfolio. It is the most controllable component of a long-term investment strategy: while we cannot control market returns, we can control how much and how regularly we contribute.

Periodic contributions combined with compound interest have a significant accelerating effect. In a portfolio with a short history, contributions represent the largest part of growth. Over time, the return on accumulated capital begins to exceed new contributions, known as the "inflection point" or "crossover".

Index Balance shows the monthly contributions chart by fund, the complete transaction history, and the future projection that you can adjust by modifying the monthly contribution to see the impact at 10, 20, or 30 years.

Practical example

Contributing €300 per month for 25 years with a 7% average annual return, the final capital would be approximately €243,000, of which only €90,000 are personal contributions and €153,000 is accumulated return. In the first 10 years, contributions represent 70% of capital. In the last 5 years, accumulated returns represent 80%.