Investment Calculator
Historical Returns
Understanding Investment Growth
The Power of Compound Growth
When you invest, your returns earn their own returns. This compounding effect is what makes long-term investing so powerful. The longer your money is invested, the more dramatic the compounding effect becomes.
Example: $10,000 at 7% Annual Return
- After 10 years: $19,672
- After 20 years: $38,697
- After 30 years: $76,123
- After 40 years: $149,745
Key Investment Concepts
Expected Return
The average annual percentage gain you expect from your investments. Higher-risk investments typically offer higher potential returns.
Inflation
The rate at which prices rise over time. Your real return is your nominal return minus inflation.
Dollar-Cost Averaging
Investing a fixed amount regularly regardless of market conditions. This reduces the impact of volatility.
Time in Market
Generally more important than timing the market. Starting early gives your money more time to compound.
Impact of Starting Age
The earlier you start investing, the less you need to save to reach the same goal:
| Start Age | Monthly Amount | Years Investing | Total at 65 |
|---|---|---|---|
| 25 | $500 | 40 years | $1,199,000 |
| 35 | $500 | 30 years | $567,000 |
| 45 | $500 | 20 years | $246,000 |
| 55 | $500 | 10 years | $87,000 |
*Assumes 7% annual return
Real vs Nominal Returns
Nominal Return
The return without adjusting for inflation. This is what you see in your account balance.
Real Return
The return after subtracting inflation. This represents your actual increase in purchasing power.
Real Return ≈ Nominal Return - Inflation Rate
Risk and Return
| Investment Type | Historical Return | Risk Level |
|---|---|---|
| Savings Account | 0.5-5% | Very Low |
| Government Bonds | 3-5% | Low |
| Corporate Bonds | 4-7% | Low-Medium |
| S&P 500 Index | 8-12% | Medium |
| Individual Stocks | Variable | High |
Investment Disclaimer
Past performance does not guarantee future results. All investments carry risk, including potential loss of principal. This calculator is for educational purposes only and should not be considered financial advice. Consult a qualified financial advisor for personalized guidance.
Frequently Asked Questions
What is a realistic expected return for investments?
Historical averages vary by asset type: S&P 500 index funds have returned about 10-11% annually before inflation (7-8% after). Bonds average 4-6%, and savings accounts 1-5% depending on rates. Use conservative estimates (6-8% for stocks) for planning. Remember, past performance doesn't guarantee future results.
Is it better to invest a lump sum or monthly?
Mathematically, lump sum investing typically outperforms dollar-cost averaging about 2/3 of the time because markets trend upward. However, monthly investing reduces timing risk, is more practical for most earners, and provides psychological comfort. The best approach: invest lump sums when available, plus contribute regularly from income.
How much should I invest each month?
A common guideline is to save/invest 15-20% of your gross income for retirement. At minimum, contribute enough to get any employer 401(k) match (free money). Prioritize: 1) Emergency fund (3-6 months expenses), 2) High-interest debt payoff, 3) Employer match, 4) IRA/Roth IRA, 5) Additional 401(k), 6) Taxable accounts.
Why does starting early matter so much?
Compound growth is exponential, so time is the most powerful factor. Starting at 25 investing $500/month at 7% yields about $1.2 million by 65. Starting at 35 with the same amount yields only $567,000 - less than half. The 10-year head start more than doubles the result despite contributing the same monthly amount.