Investment Calculator

Understanding Investment Growth and Compound Interest

Compound interest is often called the "eighth wonder of the world" for good reason. It's the process where your investment earns returns, and those returns generate their own returns. Over time, this compounding effect can transform modest, consistent contributions into substantial wealth.

Our investment calculator helps you visualize the long-term growth potential of your investments, factoring in regular contributions, expected returns, and the time value of money.

How to Use This Calculator

Initial Investment: Enter your starting amount
Monthly Contribution: Add your planned regular deposits
Expected Return: Input your anticipated annual return rate (historical stock market average: 7-10%)
Time Horizon: Select how many years you'll invest
View Growth: See your projected final balance and total gains

Key Investment Concepts

Compound Interest

Earning returns on your returns. The longer you invest, the more powerful compounding becomes. Starting early is one of the most important investment decisions you can make.

Time Horizon

The length of time you plan to invest before needing the money. Longer horizons allow you to weather market volatility and benefit more from compounding.

Risk vs. Return

Generally, higher potential returns come with higher risk. Diversification and understanding your risk tolerance are crucial for long-term success.

Investment Principles for Success

Start Early: Time is your greatest asset. Starting 10 years earlier can double or triple your final wealth
Consistency Matters: Regular contributions, even small ones, compound significantly over decades
Diversify: Don't put all eggs in one basket. Spread investments across asset classes and sectors
Stay the Course: Market volatility is normal. Avoid emotional decisions based on short-term fluctuations
Minimize Fees: High fees erode returns. Even 1% annually can cost hundreds of thousands over a lifetime
Reinvest Dividends: Automatically reinvesting distributions maximizes compound growth

Historical Market Returns

Understanding historical performance helps set realistic expectations:

S&P 500 (Large US Stocks): ~10% average annual return since 1926
Bonds: ~5-6% average annual return
Real Estate: ~8-10% average annual return (varies greatly by location)
Inflation: ~3% average annual rate (reduces purchasing power)

Note: Past performance doesn't guarantee future results. These are averages that include significant year-to-year volatility.

Frequently Asked Questions

What's a realistic rate of return?

For diversified stock portfolios, 7-10% annually is reasonable long-term. Conservative bond portfolios might see 3-5%. Always account for inflation (typically 2-3%) when calculating real returns.

How much should I invest monthly?

Financial experts often recommend saving 15-20% of gross income for retirement. Start with what you can afford and increase contributions as income grows. Even $100/month compounds significantly over decades.

Should I pay off debt or invest?

Generally, pay off high-interest debt (>6-7%) first. For low-interest debt like mortgages, you might invest simultaneously. Always maintain an emergency fund of 3-6 months' expenses before aggressive investing.

What about taxes on investment gains?

Tax-advantaged accounts (401k, IRA, Roth IRA) offer significant benefits. Long-term capital gains (assets held 1+ year) are taxed more favorably than ordinary income. Consult a tax professional for personalized advice.

Disclaimer: This calculator provides projections based on hypothetical returns. Actual investment performance varies and includes periods of negative returns. Past performance doesn't indicate future results. Consult a financial advisor before making investment decisions.