Investment Calculator

Year-by-Year Breakdown

Year	Contributions	Interest Earned	Total Balance

How to Use the Investment Calculator

Enter your initial investment -- the lump sum you plan to invest upfront.
Set your monthly contribution -- the amount you will add each month.
Choose your expected annual return rate -- historically, the S&P 500 has averaged about 7-10% annually after inflation.
Select the investment period -- how many years you plan to let your money grow.
Pick a compound frequency -- how often interest is compounded (monthly is most common).
Results update in real time, including the growth chart and year-by-year table.

Compound Interest Formula

The future value with compound interest and regular contributions is calculated using:

FV = P(1 + r/n)^(nt) + PMT x [((1 + r/n)^(nt) - 1) / (r/n)]

Where:

FV = Future Value
P = Initial Investment (Principal)
r = Annual Interest Rate (decimal)
n = Compounding periods per year
t = Number of years
PMT = Periodic payment amount (adjusted for compounding frequency)

Common Investment Examples

Scenario	Initial	Monthly	Return	Years	Result
Conservative Saver	$5,000	$200	5%	20	~$95,500
Moderate Investor	$10,000	$500	7%	20	~$301,000
Aggressive Growth	$25,000	$1,000	10%	30	~$2,260,000
Retirement Starter	$1,000	$300	8%	35	~$690,000
College Fund	$10,000	$250	6%	18	~$113,000

Investment Growth Guide

The Power of Compound Interest

Albert Einstein reportedly called compound interest "the eighth wonder of the world." Compound interest means you earn interest not just on your original investment, but also on the interest you have already earned. Over time, this creates an exponential growth curve that can turn modest regular contributions into substantial wealth.

Why Start Early?

Time is the most powerful factor in compound interest. Someone who invests $300/month starting at age 25 will have significantly more at age 65 than someone who invests $600/month starting at age 35, even though the late starter contributes more total money. This is because the early investor has 10 extra years of compounding working in their favor.

Choosing a Return Rate

Historical average annual returns for common investment types:

Savings account: 0.5% - 5% (varies with interest rate environment)
Bonds: 3% - 5%
S&P 500 Index: ~10% nominal, ~7% after inflation
Real estate: 8% - 12% (including appreciation and rental income)
Growth stocks: 10% - 15% (with higher volatility)

Compound Frequency Matters

The more frequently interest is compounded, the more you earn. Monthly compounding yields slightly more than quarterly, which yields more than annual compounding. The difference becomes more noticeable with larger balances and higher interest rates.

Investment Best Practices

Start Early and Stay Consistent

The single most important factor in building wealth is time in the market. Starting to invest at age 25 versus 35 can result in nearly double the wealth at retirement, even with identical contributions and returns. Set up automatic monthly contributions to remove emotion from the process and ensure consistency.

Diversify Your Portfolio

Never put all your money in a single stock or asset class. A diversified portfolio typically includes a mix of domestic stocks, international stocks, bonds, and possibly real estate or commodities. Index funds and ETFs provide instant diversification at low cost. A common starting allocation is your age in bonds (e.g., 30% bonds at age 30) with the rest in stocks.

Minimize Fees and Taxes

Investment fees compound just like returns, but against you. A 1% annual fee can reduce your final balance by 25-30% over 30 years. Choose low-cost index funds (expense ratios under 0.10%) over actively managed funds. Use tax-advantaged accounts (401k, IRA, Roth IRA) before taxable accounts. Avoid frequent trading, which triggers short-term capital gains taxes.

Rebalance Periodically

Review your portfolio allocation once or twice a year. As different asset classes grow at different rates, your portfolio will drift from its target allocation. Rebalancing sells overweight positions and buys underweight ones, maintaining your desired risk level.

Avoid Common Mistakes

Timing the market -- Missing just the 10 best trading days over 20 years can cut returns in half
Panic selling -- Market downturns are normal; stay invested through volatility
Chasing past performance -- Last year's top fund rarely repeats
Ignoring inflation -- Cash savings lose purchasing power over time
Not having an emergency fund -- Keep 3-6 months of expenses in cash before investing

Investment Type Comparison

Investment Type	Avg. Annual Return	Risk Level	Best For
High-Yield Savings	4-5%	Very Low	Emergency fund, short-term goals
US Treasury Bonds	3-5%	Low	Capital preservation, retirees
Corporate Bonds	4-6%	Low-Medium	Income generation, moderate risk
S&P 500 Index Fund	10% (7% real)	Medium	Long-term growth, retirement
International Stocks	7-9%	Medium-High	Diversification, growth
Real Estate (REITs)	8-12%	Medium-High	Income + appreciation
Growth Stocks	10-15%	High	Long time horizons, higher risk tolerance

Note: Past returns do not guarantee future performance. All investments carry risk. The return figures above are historical averages and actual results will vary year to year.

Frequently Asked Questions

What is compound interest?

Compound interest is interest calculated on both the initial principal and the accumulated interest from previous periods. Unlike simple interest (which only accrues on the principal), compound interest grows exponentially over time, making it a powerful tool for wealth building.

What annual return rate should I use?

For a diversified stock portfolio, 7% (inflation-adjusted) or 10% (nominal) is commonly used based on historical S&P 500 data. For bonds, use 3-5%. For savings accounts, use 1-5%. Be conservative in your estimates to avoid overestimating future wealth.

How does compounding frequency affect my returns?

More frequent compounding produces slightly higher returns. For example, $10,000 at 10% for 10 years yields $25,937 with annual compounding, $26,533 with monthly compounding, and $27,183 with daily compounding. Monthly compounding is most common for investment accounts.

Does this calculator account for inflation?

This calculator shows nominal returns. To estimate real (inflation-adjusted) returns, subtract the expected inflation rate (typically 2-3%) from your annual return rate. For example, use 7% instead of 10% to approximate inflation-adjusted S&P 500 returns.

Are taxes accounted for in this calculation?

No, this calculator shows pre-tax returns. Taxes on investment gains vary depending on account type (taxable, IRA, 401k), holding period, and your tax bracket. For tax-advantaged accounts like Roth IRAs, the calculated amount is closer to your actual take-home amount.

What is the Rule of 72?

The Rule of 72 is a quick way to estimate how long it takes to double your money. Divide 72 by your annual return rate. For example, at 8% annual return, your money doubles in approximately 72/8 = 9 years. This is a useful mental shortcut for quick investment planning.

Should I invest a lump sum or use dollar-cost averaging?

Statistically, lump sum investing outperforms dollar-cost averaging about two-thirds of the time because markets tend to go up over time. However, dollar-cost averaging (regular monthly contributions) reduces emotional stress and timing risk, and is often more practical since most people invest from their paycheck.

How accurate is this calculator?

The math is precise for fixed-rate investments. However, real-world investment returns fluctuate year to year. This calculator assumes a constant return rate, which is useful for planning but actual results will vary. Use it as a guideline rather than a guarantee.