Compound Interest Calculator

Australian ETFs benefit from compound growth through capital growth (increase in ETF unit price), dividend reinvestment plans (DRP), and franking credits on Australian shares.

Popular Australian ETFs for compound growth:

• VAS, Vanguard Australian Shares Index ETF
• A200, BetaShares Australia 200 ETF
• VGS, Vanguard MSCI Index International Shares ETF

By reinvesting dividends through DRP, you automatically buy more ETF units with your dividend payments, accelerating compound growth.

Dollar-Cost Averaging (DCA) is an investment strategy where you invest a fixed amount regularly, regardless of market conditions. This might mean investing a portion of each paycheck, using automatic investment plans through your broker, or making regular super contributions beyond employer contributions.

Benefits of DCA:

• Reduces the impact of market volatility
• Helps develop consistent investing habits
• Works well with compound interest over time
• Removes emotional decision-making from investing

Franking credits (imputation credits) can enhance your compound returns by providing tax credits for dividends where companies have already paid tax, potentially increasing your after-tax return, and offering refunds if your tax rate is below the 30% company tax rate.

Example: A $70 cash dividend with 100% franking carries a $30 franking credit, making the gross dividend $100. When reinvested, this larger effective dividend accelerates compound growth.

More frequent contributions (e.g., monthly vs yearly) typically result in better returns because money is put to work sooner and captures more compounding opportunities. Regular contributions also help average out market volatility.

Example: The same $12,000 annual total invested monthly ($1,000/month) or weekly ($230.77/week) often outperforms a single annual lump sum due to more frequent compounding.