Investment Calculator

An investment plan comes down to four numbers: what you start with, what you add along the way, the rate you earn, and how long you leave it alone. Fix any four of those and the fifth is settled. This calculator works in both directions. The tabs across the top pick which figure you want to solve for, so you can project an ending balance from what you already have, or work backwards from a target such as $1,000,000 and find the monthly contribution, the return, the starting amount, or the years it takes to get there.

The five figures the tabs solve for

• End amount: the balance you finish with. Enter your starting amount, contributions, rate, and years, and the calculator projects forward.
• Additional contribution: the deposit needed each month or year to hit a target. At $20,000 to start, 6% a year, and ten years, reaching $1,000,000 takes $5,905.66 a month.
• Return rate: the annual return your plan depends on. Keep the same $20,000, $1,000 a month, and ten years, and that same $1,000,000 target needs 32.337% a year, which is a signal the goal or the timeline needs to change.
• Starting amount: the lump sum required today. With $1,000 a month at 6% for ten years, you would need $467,228.85 up front.
• Investment length: the time required. The same $20,000 and $1,000 a month at 6% reaches $1,000,000 in 28.71 years.

Those four solved answers all come from the same target, and the contrast between them is the useful part. Stretching the timeline does what no plausible return rate can.

Return rate

The return rate is the number people guess at most and control least. It is also the one the result is most sensitive to, so it pays to use a figure with some history behind it rather than a hopeful one. Over the past century the S&P 500 has returned roughly 10% a year on average, which nets out to about 7% after inflation of around 3%. Bond-heavy portfolios have run closer to 3% to 5%. Cash in a savings account or a CD tracks short-term rates and often loses ground to inflation.

Averages hide the ride. A 10% average does not mean 10% every year. The index has fallen more than 35% in a single year and risen more than 30% in others, and the long-run average is what you get for staying invested through both. A plan that only works if returns arrive smoothly is not a plan. If you want to see how sensitive your own numbers are, change the rate by one point and watch the ending balance move.

Starting amount

The starting amount is the money already in the account on day one. It matters most in short plans, where there is not enough time for contributions to pile up, and it matters less in long ones, where growth on growth takes over. In the ten-year example above, needing $467,228.85 up front to reach $1,000,000 shows how much work a lump sum has to do when the clock is short.

Investment length

Time is the quietest of the four and usually the most powerful. Compounding pays you a return on your past returns, so each year's gain is calculated on a larger base than the last. Push the horizon out and the interest column in the schedule below eventually overtakes everything you put in yourself. In the 28.71-year answer above, contributions total $344,528.57 while interest accounts for $635,471.43, nearly twice the deposits. The Compound Interest Calculator shows the same effect at different compounding frequencies.

Additional contributions

Regular deposits are the part you actually control. You can choose monthly or annual contributions here, and whether each one lands at the beginning or the end of the period. Beginning-of-period deposits earn one extra period of return each, so they finish a little higher for the same money.

Investing a set amount on a schedule regardless of price is called dollar-cost averaging. The same $500 buys more shares when prices are down and fewer when they are up, which takes the timing decision off your plate. It does not guarantee a profit, and a lump sum invested early has historically finished ahead more often than not, but a schedule is what most people can actually stick to out of a paycheck.

Types of investments

The rate you enter should reflect what you are actually buying. The main options sit on a spectrum from safe and slow to volatile and potentially fast.

• Certificates of deposit: a bank deposit locked for a set term at a fixed rate, insured by the FDIC up to $250,000 per depositor, per bank, per ownership category. Withdraw early and you usually forfeit some interest. See the CD Calculator.
• Bonds: loans to a government or a company that pay interest on a schedule and return the principal at maturity. U.S. Treasuries carry the least credit risk and are exempt from state and local tax; corporate bonds pay more and can default; municipal bonds are often free of federal tax. Bond prices fall when interest rates rise.
• Stocks: ownership in a company, paying off through price appreciation, dividends, or both. Individual shares can go to zero, which is why most investors hold index funds or ETFs that spread the money across hundreds of companies at a low cost.
• Real estate: rental property produces income and can appreciate, but it ties up cash, needs maintenance, and sells slowly. REITs give exposure to property without owning a building. Our Rental Property Calculator handles the cash-flow side.
• Commodities: gold, silver, oil, and farm goods. They produce no income, so the entire return depends on price. Gold is often held as a hedge against inflation and currency trouble rather than as a growth asset.
• A business: money put into your own company or a private one. The potential return is the highest on this list and so is the chance of losing everything.

Risk, diversification, and fees

Higher expected returns come with wider swings, and there is no asset that pays equity-like returns with savings-account safety. What you can do is spread the risk. Holding many companies across sectors and countries removes the risk tied to any one of them, and holding both stocks and bonds softens the years when stocks fall. As a rough guide, money you need within five years does not belong in the stock market.

Fees deserve the same attention as returns because they come out of the same number. A fund charging 1% a year against one charging 0.05% costs you nearly a full point of return every year, compounded for the life of the account. Over decades that gap runs to six figures on a large balance.

Taxes and inflation

This calculator reports pre-tax figures. In a taxable account, dividends and realised gains are taxed along the way, while tax-advantaged accounts such as a 401(k), a traditional IRA, or a Roth IRA defer or remove that drag. Inflation is the other quiet subtraction: at 3% a year, $1,000,000 in thirty years buys roughly what $412,000 buys today. That is a reason to plan with a real return, meaning your return minus inflation, when the goal is decades out. To carry the numbers into a full retirement plan, use the Retirement Calculator or the 401(k) Calculator.