Free investment calculator to evaluate various investment situations considering starting and ending balance, contributions, return rate, and investment
Here’s what you’ll need to enter to get started:
Initial investment: Enter how much you plan to invest to start.
Years of investment growth: Enter the number of years you plan to stay invested. For example, if you’re investing for a goal that is six years away, you’d enter 6 in this field.
Estimated rate of return: The calculator uses a 6% average annual investment return — the amount your investment will grow each year — as a default. As a simple example, if you invest $1,000 and earn a 6% return, you’ll have about $1,060 after a year. It’s OK to go with our default if you’re not sure, but you can also enter your expected rate of return based on the investments you’ve selected. Tip: If you’ve been investing for a while, pull a statement from your investment account — it should show your investments’ average annual return for the time you’ve owned the account.
Compound frequency: This is how often the money you earn from your investment return is added to your balance. “Compounding” is when you begin earning not just on your initial investment, but also on the money you’ve earned on that investment. For example, let’s say your $1,000 earns $5 the first month you are invested. The next month, your 6% investment return will be on an investment balance of $1,005 instead of $1,000. Each month that continues, and as your balance grows, the investment return grows as well.
Typically returns from investments like stocks or mutual funds are compounded daily; some bank products, like savings accounts, will compound monthly. If you’re not sure, you can select monthly or even annually to be conservative.
Amount of recurring investments: If you’re planning to invest more money in the future, especially on a regular basis, the calculator can add that in. Enter the amount you plan to invest going forward, and how frequently you’ll make those investments — every month (monthly) or every year (annually).
Our Investment Calculator can be used for almost any investment opportunity that can be simplified to the variables above. The following is a list of some common investments. The investment options available are far beyond what was listed.
A simple example of a type of investment that can be used with the calculator is a certificate of deposit, or CD, which is available at most banks. A CD is a low-risk investment. In the U.S., most banks are insured by Federal Deposit Insurance Corporation (FDIC), a U.S. government agency. This means the CD is guaranteed by FDIC up to a certain amount. It pays a fixed interest rate for a specified amount of time, giving an easy-to-determine rate of return and investment length. Normally, the longer that money is left in a CD, the higher the rate of interest received. Other low-risk investments of this type include savings accounts and money market accounts, which pay relatively low rates of interest.
Risk is a key factor when making bond investments. In general, premiums must be paid for greater risks. For example, buying the bonds or debt of some companies rated at a risky level by the agencies that determine levels of risk in corporate debt (Moody’s, Fitch, Standard & Poor’s) will earn a relatively high rate of interest, but there is always a risk that these companies might go out of business, possibly resulting in losses on investments.
Equity or stocks are popular forms of investments. While they are not fixed-interest investments, they are one of the most important forms of investments for both institutional and private investors.
Another popular investment type is real estate. A popular form of investment in real estate is to buy houses or apartments.
Last but not least are commodities. These can range from precious metals like gold and silver, to useful commodities like oil and gas. Investment in gold is complex, as the price of it is not determined by any industrial usage but by the fact that it is valuable due to being a finite resource.
By definition, investing comes with some risk. However, one of the best ways to minimize that investment risk is to ensure your portfolio is diversified.
