How This Investment Return Calculator Works
This calculator projects the future value of an investment based on your starting amount, additional annual contributions, expected annual return, and time horizon. It's useful for estimating growth in stocks, index funds, ETFs, or other investment accounts.
Understanding Expected Return
Your expected annual return should reflect the type of investment you're making. Historically, diversified stock portfolios have returned around 7-10% annually over long periods (before inflation), while bonds and savings accounts return significantly less but carry lower risk. Past performance doesn't guarantee future results.
Why Time Horizon Matters So Much
The longer your money stays invested, the more it benefits from compounding. A longer time horizon also generally allows investors to ride out short-term market volatility, which is why financial advisors often recommend a longer investment period for higher-risk, higher-return assets like stocks.
Diversification and Risk
This calculator assumes a steady annual return, but real investments fluctuate year to year. Diversifying across asset classes (stocks, bonds, real estate) can help smooth out returns and reduce risk, though it may also reduce potential upside compared to concentrated positions.
Frequently Asked Questions
Does this account for market volatility?
No, this calculator assumes a constant annual return for simplicity. Real investment returns vary significantly year to year, even if the long-term average matches your input.
Should I subtract fees from my expected return?
Yes, for a more accurate projection, use a net return rate that already accounts for fund fees, management costs, or advisor fees, since these compound and reduce your returns over time.
What's the difference between this and the compound interest calculator?
This calculator is designed around annual lump-sum contributions (useful for annual bonuses or lump investments), while the compound interest calculator focuses on monthly contributions, ideal for salary-based investing.