Investment Calculator

Understanding Investment Growth

Our Investment Calculator helps you estimate how your investments can grow over time through compounding returns. Understanding these concepts is essential for making informed investment decisions.

Compound vs Simple Growth

• Compound Growth: Earnings are reinvested and generate their own earnings over time, leading to exponential growth.
• Simple Growth: Earnings are calculated only on the original principal amount, leading to linear growth.

Key Investment Formulas

Future Value with Regular Contributions:
FV = P × (1 + r)^n + C × [((1 + r)^n - 1) / r]
Where:
FV = Future Value
P = Principal investment amount
r = Annual interest rate (in decimal)
n = Number of years
C = Regular contribution amount

Return on Investment (ROI):
ROI = (Current Value - Cost of Investment) / Cost of Investment × 100%

The Power of Compound Growth

Compound growth is the most powerful force in investing. The key factors that affect investment growth are:

• Time: The longer your money compounds, the more significant the growth
• Rate of return: Higher returns accelerate growth
• Regular contributions: Adding money regularly significantly boosts the final amount
• Starting early: Even small amounts invested early can outperform larger amounts invested later

Practical Applications of Investment Calculation

• Retirement planning: Estimate how your retirement savings can grow
• Education funding: Plan for future education expenses
• Wealth building: Set and track financial goals
• Investment comparison: Evaluate different investment options
• Risk assessment: Understand potential outcomes based on different return scenarios

Frequently Asked Questions

Q: What is a realistic rate of return to expect?
A: Historical average returns are approximately 7-10% for stock markets, 3-5% for bonds, and 1-3% for savings accounts, but actual returns vary based on market conditions.

Q: How often should I contribute to my investments?
A: Regular contributions, such as monthly or quarterly, help with dollar-cost averaging and can improve long-term returns.

Q: Should I increase my contributions over time?
A: Yes, increasing contributions as your income grows helps accelerate wealth building and counteracts inflation.

Q: How does inflation affect my investment returns?
A: Inflation reduces purchasing power. Your real return is your nominal return minus inflation. Aim for returns that outpace inflation.

Q: What is the Rule of 72?
A: The Rule of 72 is a simple way to estimate how long it will take for an investment to double. Divide 72 by your expected annual return to get the approximate number of years.