Free investment calculator for planning your financial future
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An investment calculator is a tool that helps you estimate the future value of your investments based on factors like initial investment, regular contributions, expected return rate, and investment timeframe. It helps you plan your financial goals and understand the power of compound interest.
Compound interest is when you earn interest not only on your initial investment but also on the accumulated interest from previous periods. This creates a snowball effect where your money grows at an accelerating rate over time. For example, if you invest $10,000 with a 7% annual return, you'll earn $700 in the first year. In the second year, you'll earn 7% on $10,700, and so on.
A good return rate depends on your investment goals, risk tolerance, and the type of investment. Historically, the S&P 500 has returned about 10% annually before inflation. However, it's important to note that past performance doesn't guarantee future results. Most financial advisors suggest using a conservative estimate of 6-8% for long-term planning.
Regular contributions are key to building wealth. Most experts recommend contributing monthly to take advantage of dollar-cost averaging, which helps reduce the impact of market volatility. However, the frequency should align with your income schedule and financial goals. The most important thing is to be consistent with your contributions.
Investing at the beginning of the period (beginning of month/year) allows your money to start earning returns immediately, which can lead to slightly higher overall returns due to the power of compound interest. Investing at the end of the period means your contributions start earning returns in the next period. While the difference may seem small, over long periods, it can add up significantly.