In this sections I have added 2 Excel sheets that allow you to calculate the mirracle of compounding. Also refered to as the snowball effect.
The first Excel sheet helps you to calculate the snowball effect of compounding without any new investments in your stock portofolio.
The expected return rate in this Excel sheet is 6,08%. I chose this figure as this the average growth rate of dividends in the S&P500.
The estimate inflation I chose is 2%, this is the inflation target for the ECB.
In Excel I made the dividend calculator when you reinvest some money monthly. As you can see this money goes up every month. I have decided to link the amount you invest is in line with inflation.
If you play with the numbers you will quickly realise that most import factor of growth is the compounding of your investment.