📅 Last updated: 8 May 2026
· 🏷 Topic: Compound interest, samengestelde rente, beginners
· 🇧🇪 For: Belgian beginners
Compound interest (samengestelde rente) is mathematically simple but emotionally hard to grasp. It’s the effect of your returns themselves generating returns — and the longer your horizon, the stronger this effect becomes.
The basic formula
Final capital = Contribution × (1 + return)^number of years
Example: €1,000 invested at 7% per year.
| Year | Capital |
|---|---|
| 0 | €1,000 |
| 5 | €1,403 |
| 10 | €1,967 |
| 20 | €3,870 |
| 30 | €7,612 |
| 40 | €14,974 |
Over 40 years your contribution becomes nearly 15 times as large, without you adding anything. That’s compound interest.
What if you contribute periodically?
€200/month invested at 7% per year:
| Period | Final capital | Contributed | Return component |
|---|---|---|---|
| 10 years | ~€34,600 | €24,000 | €10,600 |
| 20 years | ~€104,000 | €48,000 | €56,000 |
| 30 years | ~€243,000 | €72,000 | €171,000 |
| 40 years | ~€525,000 | €96,000 | €429,000 |
Over 40 years, compound interest has added €429,000 to the €96,000 you contributed yourself.
The difference between starting early and starting late
Person A invests €200/month from age 25 to 65 (40 years): final amount ~€525,000.
Person B invests €200/month from age 35 to 65 (30 years): final amount ~€243,000.
The difference of €282,000 comes mostly from 10 extra years of compounding — not from 10 extra years of contributions (€24,000 more).
Person C waits until age 45 and from then on invests €400/month (twice as much) until 65 (20 years). Final amount: ~€208,000 — still less than person A, who contributed half as much but started 20 years earlier.
💡 Time is your greatest lever. Someone who is 25 and doesn’t invest is missing something that their 35-year-old self can’t recover, even with double the contribution.
The rule of 72
A handy rule of thumb: at an average return of r% per year, your money roughly doubles every 72/r years.
| Return | Doubling time |
|---|---|
| 4% | 18 years |
| 6% | 12 years |
| 8% | 9 years |
| 10% | 7.2 years |
At an average global-equity real return of ~7%, your wealth doubles roughly every ~10 years. Over 40 years = four doublings = 16× your original capital.
How inflation compounds against you
Compound interest also works in the other direction: at an inflation rate of 2.5% per year, €10,000 loses 64% of its purchasing power over 40 years. Money in a savings account that doesn’t at least keep up with inflation shrinks in real terms.
Concrete example:
- €10,000 in a savings account at 1.5% interest vs. 2.5% inflation.
- After 30 years: nominally €15,598, in real terms ~€7,448 in today’s purchasing power.
The same €10,000 invested at 6% real return: after 30 years ~€57,435 in today’s purchasing power. A difference of 8x.
Costs compound too
1% extra management costs per year seems like nothing. Over 30 years:
- 7% gross return, 0.2% costs → 6.8% net → ~€73,000 on a €10,000 contribution.
- 7% gross return, 1.2% costs → 5.8% net → ~€55,000 on a €10,000 contribution.
Difference: €18,000 less final capital, just from 1% more in costs. This is why low-cost ETFs historically outperform expensive active funds, not because they’re “smarter”.
Practical take-aways
- Start now, even with a small amount. €50/month at age 25 is worth more at age 65 than €200/month at age 45.
- Reduce costs — TER, transaction costs, taxes. Every percent counts over decades.
- Reinvest dividends — accumulating ETFs do this automatically; with distributing ones you have to reinvest the money yourself.
- Accept fluctuations — anyone who exits during a crash breaks the compound effect.
What else compounds in a Belgian portfolio
The curve above assumes untaxed accumulation. In practice two tax effects run alongside it, and they pull in opposite directions.
1. The entry cost works against you — on every contribution
Stock-exchange tax is charged on each purchase. An accumulating ETF on the FSMA list costs 1.32% per contribution; a fund at 0.12% costs eleven times less. For a monthly investor that means every instalment into the expensive fund starts 1.32% behind, and that gap compounds for the whole holding period.
On €200 a month that is €31.68 a year against €2.88. Over twenty years what matters is not only the difference in amounts invested, but the return you would have earned on that difference.
2. Accumulation defers tax — helpful, but it is deferral
An accumulating fund distributes nothing, so there is no annual 30% withholding tax skimming your reinvestment base. That is a real compounding advantage over a distributing fund.
But since 1 January 2026 the realised gain on sale is taxed at 10% above the annual €10,000 exemption. The advantage is deferral, not avoidance — and the charge lands at the end, on a base that has grown throughout.
What this means practically
- The fund’s tax rate outweighs its TER for regular contributions: 1.20% difference on entry against 0.20% a year.
- Spread sales across calendar years when you eventually draw down, so you use the €10,000 exemption more than once.
- Time remains the dominant factor — no tax optimisation makes up for ten years of not investing.
Sources
- Wikifin — Compound interest and the long term
- ECB — Inflation target
- SPIVA Europe — Long-term study of market returns
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