Dividend investing provides regular income but may grow more slowly if payouts are not reinvested. Growth investing maximizes compounding by reinvesting all returns. This calculator compares total wealth from each approach over your time horizon.
How to use this calculator
- Enter starting balance and annual contributions.
- Enter dividend yield and total expected return.
- Enter your investment time horizon.
- Compare strategy values and read which profile each approach suits.
Formula
Growth strategy reinvests the full return each year. Dividend strategy pays out the dividend yield as cash while the portfolio grows at (total return − dividend yield). Total dividend value includes cumulative cash income plus remaining portfolio.
Example
Starting with $25,000 and adding $6,000/year for 20 years at 8% total return with a 3% dividend yield, growth reinvestment reaches about $393,000 while the dividend approach totals roughly $355,000 including $78,000 in cash income taken along the way.
Frequently asked questions
- Who should choose dividend investing?
- Investors who need current income, are near or in retirement, or prefer companies with steady payout histories may favor dividends.
- Who should choose growth investing?
- Younger investors in wealth-building mode who do not need current income often benefit from full reinvestment and long-term compounding.