How to read the result
Reinvestment splits into three pieces. Reinvested dividends join the principal and start paying dividends themselves — that is compounding. Frequency decides how much earlier compounding starts. An annual fee is charged on the balance, so it also costs you its own compounding.
Reference figures
Typical ranges, not targets — check your own situation.
| Setting | Typical range | What to know |
|---|---|---|
| Dividend yield | 2–5% for most US dividend funds | Nominal, on market value |
| Annual price growth | 0–8% | An assumption, not a forecast |
| Account fee | 0.0–0.6% | Compare accounts on the same basis |
| Monthly contribution | Whatever your budget supports | Check cash flow and debt first |
| Reinvestment frequency | Monthly is the common default | Spaced evenly through the year in this model |
| Account type | Taxable, tax-deferred, or Roth | Tax treatment is not modeled |
Assumptions and limits
- Growth, yield, and fee are constant assumptions.
- Dividends are assumed never cut; companies can suspend payouts.
- Withholding tax, capital gains tax, and commissions are not modeled.
- Reinvestment price movement is not modeled: real DRIPs buy at the ex-dividend price.
- Inflation is ignored; adjust growth for an after-tax view.
- Contributions are deposited at month-end.
- Not investment advice. No product or strategy is recommended.
FAQ
Should I take the dividend as cash?
Compare the cash and monthly rows in the frequency table. Cash you withdraw loses the dividend-on-dividend layer.
Once a year, or every month?
Once a year delays compounding about six months: roughly $6,900 in the example above.
Why does total growth include dividends?
Reinvested dividends become shares, not cash, so they are already inside the balance. Adding them again would double-count.
Do yield and growth affect each other?
In the model they are separate. In reality a price drop often lifts the yield, and a strong run dilutes it.
What does a 0.3% annual fee mean?
About 0.3% of the account value is charged yearly, and that money also loses its compounding.
What if growth is negative?
The dividend shrinks as the balance falls while your purchase buys more shares. The effects partly offset.
Is 365 reinvestments a year realistic?
Some brokers do it daily, others monthly or quarterly. This model spaces reinvestments evenly.
How much should I contribute each month?
The tool does not pick an amount. Secure 3–6 months of expenses, clear high-interest debt, then invest the rest.
Why are taxes not included?
Tax treatment depends on account type and where you live. For an after-tax estimate, net it out of growth.
Methodology
The model steps month by month: growth is added, the fee deducted, the dividend computed, then dividends are reinvested on your schedule. Final balance minus contributions equals total growth.