How long does compounding take?

Everyone knows that compounding is the secret sauce to wealth accumulation, and also that it can take many years. The maths shows a hockey stick growth curve, with all the action at the end.

This can be very daunting, and de-motivating, especially if you are at the beginning of your investment journey.

As of 2024, I have 25 years of detailed records of contributions to my ISA. Since I have only added, and not yet withdrawn from this pot, it makes a great practical case study to illustrate how wealth builds over time.

The purpose of sharing this with you is not to de-motivate you further! It’s to show that, providing you stick to a consistent plan, the market and the mathematics will do all the heavy lifting for you at the end.

Investment background

I made my first ISA contribution in 99/00 tax year and have made a contribution every year since. I invested mostly in FTSE100 index trackers with dividend accumulation, although recently I have split that between S&P and FTSE100.

I usually made a single contribution in the tax year, often around March time. So I wasn’t timing the market, just making regular contributions.

In early years, of course, the balance grows rapidly because the contributions dominate. Today the total balance is very roughly 50:50 between contributions and total investment return.

Compounding Growth

What is more interesting, is how the total balance grows each year. Here are the figures for the total balance each year and how they relate to both contributions and the portfolio size today.

YearFund as % of March 2024Contributions as a % of fund

You can clearly see the hockey stick in action.

After the first 10 years, 82% of my holdings were just what I put in. A modest return by any reckoning for a decade of dedicated investing.

After 16 years, I only had a balance one third of what it is today, nine years later. And those last nine annual contributions were pretty static – they only made up 18% of the growth in balance over that period.

The tipping point was 2018 when the balance was half what it is today. So half the growth has come in the last six years.

Some food for thought … I stopped work in 2019. So practically half my fund occurred since then (and that was over the shaky period of covid and high inflation).

Do not stop investing just because you retire. Especially if you are on the hockey curve, and you have a long period of expected life to live.

Finally … do not underestimate contributions as a huge factor in accumulating wealth. You might dream of 10x returns that’s going to solve all your problems. But you’re unlikely to get that.

After 25 years, contributions are 50% of my ISA portfolio. Currently, I expect not to be making too many more since I’m not earning new money (contributions since I stopped working were largely shifting money from general investing accounts to inside the tax free wrapper).

I also don’t expect to need to dip into my ISA over the next five years. So I will watch the contributions as a percent of portfolio fall, and the overall balance to continue climbing (unless we have a market crash of course – I’m prepared to ride that out just like the other three I’ve experienced).

Read more on this topic . . .


I am not your financial adviser.

The information in this post relates to my financial journey. It may or may not be relevant to your own. You need to make your own decisions on your own financial strategy.

Do not buy or sell anything based solely on what you read.