Investment Calculator: See How Your Money Can Grow Over Time

How to Use Our Investment Calculator

To get your personalized projection, you only need to enter a few key details. Here’s a simple breakdown of each input field:

• Initial Investment: This is the starting amount of money you have already saved to invest. If you’re starting from scratch, you can enter $0.

• Monthly Contribution: Enter the amount you plan to add to your investment account each month. Consistency is key to long-term growth, and even small regular contributions can make a huge difference.

• Investment Time Horizon (in Years): This is how long you plan to let your money grow. Longer time horizons often lead to significantly more growth due to compounding.

• Expected Annual Rate of Return: This is the average annual return you expect from your investments. For context, the historical average annual return for the S&P 500 (a benchmark for the U.S. stock market) is around 10% before inflation, but this is not a guarantee of future performance. A diversified portfolio might see returns between 5-8%.

• Adjust for Inflation (Optional): You can input an expected inflation rate (historically around 2-3% in the U.S.) to see your investment’s future value in today’s dollars. This helps you understand your true “purchasing power” in the future.

Understanding Your Results

The final number displayed is the estimated total value of your portfolio at the end of your investment time horizon. However, the real power is in understanding where that value comes from. Your results are broken down into three key components:

The Power of Compounding

The most important takeaway from your results is witnessing the effect of compound interest. In the beginning, your contributions will make up most of your portfolio’s growth. But as time goes on, the interest you earn will begin to earn its own interest, causing your growth to accelerate exponentially.

A chart in your results will visually break down your investment’s growth year by year, clearly showing how your interest earnings (the blue area) can eventually surpass your total contributions (the green area).

(Chart would be dynamically generated by the calculator)

Frequently Asked Questions

What is a realistic rate of return to use?

This is a critical question. A “realistic” rate of return depends entirely on your investment strategy and risk tolerance. Here are some general guidelines, but remember that past performance does not guarantee future results:

• Conservative (Mostly Bonds): 3-5%

• Moderate (Mix of Stocks and Bonds): 6-8%

• Aggressive (Mostly Stocks): 9-10%+

For long-term planning (10+ years), many people use a 7% or 8% return as a reasonable estimate for a diversified stock portfolio to account for market fluctuations.

What is the difference between simple and compound interest?

Simple interest is earned only on your initial principal amount. Compound interest is earned on both your principal and the accumulated interest from previous periods. This “interest on your interest” is what causes your investment to grow exponentially.

Concrete Example: Imagine you invest $1,000 at a 10% annual return for 3 years.

• Simple Interest: You earn $100 each year ($1,000 x 10%). Total interest after 3 years = $300.

• Compound Interest:

  • Year 1: You earn $100. Your new balance is $1,100.

  • Year 2: You earn $110 ($1,100 x 10%). Your new balance is $1,210.

  • Year 3: You earn $121 ($1,210 x 10%). Your new balance is $1,331.

  • Total interest after 3 years = $331.

That extra $31 is the result of compounding, and the difference becomes dramatically larger over longer periods.

How does inflation affect my investment returns?

Inflation is the rate at which the cost of goods and services increases, reducing the purchasing power of money. If your investment earns 7% in a year where inflation is 3%, your real rate of return is only 4%.

This is why it’s crucial to invest. Money kept in a standard savings account often loses purchasing power to inflation over time. Using the “Adjust for Inflation” feature in the calculator gives you a more realistic picture of what your money will be able to buy in the future.

How much money do I need to start investing?

This is a common misconception that holds people back. You don’t need a large sum of money to start. Many brokerage firms and robo-advisors allow you to open an account with $0 and have no minimums for investing in funds. You can start by contributing just $25 or $50 a month. The most important thing is to build the habit of investing regularly.

Are my investment earnings taxed?

Yes, typically. How they are taxed depends on the type of account you use:

• Taxable Brokerage Account: You pay capital gains taxes on your profits when you sell an investment.

• Tax-Advantaged Retirement Accounts:

  • Traditional 401(k) or IRA: You invest pre-tax money, so your contributions can lower your taxable income today. Your investments grow tax-deferred, and you pay income tax on withdrawals in retirement.

  • Roth 401(k) or IRA: You invest after-tax money. Your investments grow completely tax-free, and you pay no taxes on qualified withdrawals in retirement.

Understanding these differences is key to an effective long-term strategy.

What should I do after using this calculator?

This calculator gives you a powerful projection. Your next steps are about taking action:

1. Define Your Goal: Is this for retirement, a down payment on a house, or something else? Your goal determines your time horizon.

2. Open an Investment Account: If you don’t have one, consider opening a Roth IRA, a Traditional IRA, or a standard brokerage account.

3. Automate Your Contributions: Set up automatic monthly transfers from your bank to your investment account. This “pay yourself first” strategy is the most effective way to stay consistent.

Take the Next Step in Your Financial Plan

Now that you’ve projected your investment growth, see how it fits into your overall financial picture. Use our Retirement Calculator to see if you are on track for your golden years. To understand how much you can comfortably afford to invest each month, use our 50/30/20 Budget Calculator.