Fidelity Select 500 Index Fund (FXAIX) Investment Growth Calculator
Projected Investment Value
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Based on your inputs.Understanding the FXAIX Growth Calculator
The Fidelity Select 500 Index Fund (FXAIX) is a popular mutual fund that aims to track the performance of the S&P 500 index. This index represents approximately 500 of the largest U.S. publicly traded companies, offering broad diversification across various sectors of the American economy.
This calculator helps you project the potential growth of your investment in FXAIX over time, considering your initial investment, ongoing contributions, and an assumed annual rate of return. It's a valuable tool for financial planning and understanding the power of compound growth.
How the Calculation Works
The calculator uses a compound interest formula adapted for regular contributions. The core principle is that your investment grows not only from the initial principal but also from the returns generated on those returns over time.
The formula for the future value of an investment with regular contributions can be complex. This calculator simplifies it by iterating year by year or by using a specific financial formula for the future value of an annuity combined with the future value of a lump sum.
Let's break down the components:
- Initial Investment: The lump sum you start with. This grows each year based on the assumed annual return rate.
- Annual Contributions: The additional money you plan to invest each year. These contributions also benefit from the annual return rate, compounding over time.
- Assumed Annual Return Rate: This is the percentage growth you anticipate your investment will achieve each year. It's crucial to use a realistic rate. Historical S&P 500 returns can provide a benchmark, but past performance is not indicative of future results.
- Number of Years to Invest: The duration for which you are projecting your investment growth.
The Math Behind the Projection
While the exact internal calculation can be iterative for precision, a simplified conceptual approach involves calculating the future value of the initial lump sum and the future value of the series of annual contributions separately, then summing them.
The future value of the initial investment (FV_initial) is calculated as:
FV_initial = InitialInvestment * (1 + AnnualReturnRate)^InvestmentYears
The future value of the annual contributions (FV_contributions) is typically calculated using the future value of an ordinary annuity formula:
FV_contributions = AnnualContributions * [((1 + AnnualReturnRate)^InvestmentYears - 1) / AnnualReturnRate]
The total projected value is approximately:
Total FV = FV_initial + FV_contributions
*Note: This calculator might use a more precise year-by-year calculation or a slightly different annuity formula depending on implementation details, especially for when contributions are made within the year.*
Using the FXAIX Calculator
1. Initial Investment: Enter the amount you are initially investing in FXAIX. 2. Annual Contributions: Input the total amount you plan to contribute to your FXAIX investment annually. 3. Assumed Annual Return Rate (%): Enter your expected average annual return as a percentage (e.g., 8.5 for 8.5%). Historical averages for the S&P 500 have been around 10-12% before inflation, but actual returns vary significantly year to year. It's often prudent to use a slightly more conservative estimate for planning. 4. Number of Years: Specify how many years you want to project the growth for. 5. Click "Calculate Growth".
The result will show the estimated total value of your FXAIX investment after the specified period.
Important Considerations
- Assumptions are Key: The accuracy of the projection heavily relies on the assumed annual return rate. Market performance fluctuates, and actual results can differ significantly.
- Inflation: The projected value is in nominal terms (not adjusted for inflation). To understand purchasing power, consider inflation's impact.
- Taxes: Investment gains may be subject to taxes, which are not factored into this calculation.
- Fees: While FXAIX has a very low expense ratio, other fees or trading costs are not included.
- Investment Strategy: This calculator is for growth projection based on a specific fund. It does not constitute investment advice. Always conduct thorough research or consult a financial advisor.