Project your wealth growth with our nerdwallet investment calculator. Whether you are planning for retirement or a major purchase, use this tool to see how compound interest and regular contributions transform your financial future.
Investment Growth Calculator
Detailed Breakdown
NerdWallet Investment Calculator Formula
FV = P(1 + r/n)nt + PMT × [((1 + r/n)nt – 1) / (r/n)]
Variables:
- P (Initial Investment): The starting amount of money in your account.
- PMT (Monthly Contribution): The amount added to the investment every month.
- r (Annual Interest Rate): The expected annual return rate (as a decimal).
- n (Compounding Frequency): How many times interest is applied (standard is 12 for monthly).
- t (Time): The total number of years the money is invested.
What is an Investment Calculator?
An investment calculator is a tool that helps you estimate how much your money will grow over a specific period based on a steady rate of return and recurring contributions. By leveraging the power of compounding, even small monthly additions can lead to significant wealth over decades.
Using a nerdwallet investment calculator allows investors to visualize different scenarios, such as increasing their monthly deposits or choosing more aggressive portfolios with higher interest rates, to reach their financial goals faster.
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How to Calculate Investment Growth (Example)
- Start with your Principal: Let’s say $1,000.
- Determine Monthly Contributions: Add $100 every month.
- Choose Timeframe: Plan for 5 years.
- Estimate Returns: Assume an 8% annual return compounded monthly.
- Apply Formula: After 5 years, your $1,000 grows through interest, and your $6,000 in contributions earns interest, totaling approximately $8,834.
Frequently Asked Questions (FAQ)
Is the interest rate guaranteed? No, in most investments (like stocks), the rate varies. This calculator uses a fixed estimate for projection purposes.
How often should I contribute? Consistency is key. Monthly contributions take advantage of dollar-cost averaging and compound interest more frequently.
Does this include taxes? No, this is a gross estimate. Actual returns will vary based on capital gains taxes or 401k/IRA status.
What is a realistic interest rate? Historically, the S&P 500 averages around 7-10% annually before inflation adjustment.