Financial Calculators
Simple Investment Calculator

# Simple Investment Calculator

Free investment calculator that uses the formula PV (1 + R)^n to help investors understand how to calculate investment returns and analyze investments.

FUTURE ACCOUNT VALUE

$34,186.76 There was an error with your calculation. Ads by Google ## Table of Contents ## The Importance of Investing for Your Future Financial planning is critical for people who want to build wealth or prepare for retirement. The best way to do this is by investing your money in assets that produce additional income or growth over time. Numerous investment options are available, including stocks, bonds, mutual funds, and real estate. The level of risk and growth potential of each investment type will vary. Being able to evaluate investments properly will help you make better financial decisions. Calculating the return on your investment can get quite complicated, especially over many years. However, this is essential if you want to reach your financial goals. Example: Mark aims to become a millionaire before he turns 40. He has the opportunity to invest money in a new startup that he believes will return 15% growth each year. He has$200,000 to invest today and just turned 30 years old. Mark can invest an additional $250 each month. He wants to know if he can achieve his goal before his 40th birthday. Investment calculators make it easy to estimate this scenario. With just a few data points, Mark would see that he would end up a little short (approximately$44,000 short). While this may be disappointing, Mark can now take action to adjust his finances to improve his chances of reaching his $1,000,000 goal. ## Understanding the Investment Growth Formula Calculating a simple return on investment is fairly straightforward, but complex investing situations can make it difficult to predict the future outcome. Investors need to have a basic understanding of the formula used to calculate the future value of their investment. The initial investment formula is: $$FV = PV (1 + R)^n$$ • FV = Future Value of the investment (including all interest or growth) • PV = Present Value (starting amount before any interest, growth, and contributions) • R = Interest or Yield Rate • n = Number of periods (number of months, years, etc.) The formula above is to calculate just one period (month, year, etc.). However, the calculation gets significantly more complex as you factor in additional contributions over time. Since the starting amount changes over time as more money is invested, the calculation will need to run for each period and then be added together. The formula to calculate basic investment growth is: $$FV = PV (1 + R)^n + PV (1 + R)^{n-1} + PV (1 + R)^{n-2}...$$ If the investment period is 120 months, the formula must be repeated 120 times. The good news is that our investment calculator does all of these calculations seamlessly. ## Alternate Calculations Unlike other investing calculators, our investor calculator can also provide alternate calculations to help you make smarter decisions. Select the option that applies in the calculate menu at the top of the form. • Required Investment Amount - If an investor has a financial goal, they may not know how much they need to invest initially to achieve this goal. For example, if the investor wants to reach$1,000,000, this calculator option will let the investor know what starting balance will be required.
• Required Interest Rate - This calculator will provide the required interest rate to hit the investment goal if the investor has an option between several investments with different interest rates. This may help the investor eliminate investment options that don’t yield a high enough return.
• Required Contributions - Most investors make additional contributions to their investments over time. This calculator option will tell investors how much they need to contribute regularly to reach their desired future goals.

## How to Use the Investment Calculator

The good news is that you don’t have to memorize the investment formula to complete your investment calculation. By providing a few pieces of information, you can quickly calculate the future return of a potential investment.

• Step 1: Select the right calculator option. If you want to know what the future value of your investment will be, stick to the default calculator option. However, suppose you already have an investment goal and need additional information. In that case, you can use the other options to determine what starting balance, interest rate, and contribution amount will help you achieve your goal.
• Step 2: Populate the fields with the requested information. For interest compounding, the most common method is monthly. If you are unsure how often your growth will compound, the monthly option is the best choice.
• Step 3: Click "Calculate" and review the results. The calculator will return the future account value, initial investment required, required interest rate, or contribution amounts based on the option you selected in the first step. The results will also provide an easy-to-understand interpretation of the results.

## Real Example

Let’s say you are reviewing your finances to prepare for your retirement in 15 years. You estimate that you will need a portfolio balance of $1,300,000. So far, you have been able to save$250,000. You believe that investing your money in an index fund will yield approximately 8% growth each year. To reach your goal, you want to calculate how much additional money you will need to invest each month.

To run this calculation, enter the following values into the investment calculator:

• Calculate Option: Required Contribution
• Future Account Value: $1,300,000 • Investment Amount:$250,000
• Number of Years: 15
• Interest Rate: 8%
• Compounding: Monthly
• Frequency of Contributions: Monthly

Once you hit the Calculate button, you’ll see that you need to contribute \$1,367.68 monthly to your investments to reach your retirement goal.

## Key Benefits and Helpful Tips

Savvy investors take their time in analyzing and selecting their investments. Here are some key benefits and tips to help you get the most out of our investment calculator.

### Key Benefits:

• No Memorizing Formulas - Calculating the future value of an investment with regular contributions is extremely complex. This is typically impossible to calculate manually unless you build a complicated spreadsheet with numerous formulas. This calculator allows you to quickly perform calculations without having to memorize formulas.
• Run Multiple Scenarios - When evaluating your finances, you may need to adjust your investment strategy, or contribution amounts to reach your goals. Our investment calculator allows users to quickly adjust the information to see what changes would impact their investments most.