Share Market Investment Calculator
Your projected investment value will appear here.
Understanding Your Share Market Investment Growth
Investing in the share market can be a powerful way to grow your wealth over time. This calculator helps you project the potential growth of your investments, taking into account your initial capital, regular contributions, expected returns, and the impact of transaction fees and taxes.
How it Works: The Compound Growth Formula
The core of this calculator relies on the principle of compound growth, often referred to as the "eighth wonder of the world." It's the process where your investment earnings also start earning returns.
The formula used to project future value, considering regular contributions and compounding, is an extension of the standard future value of an annuity formula. For each year, the calculator performs the following steps:
- Add Annual Contribution: The amount you plan to invest each year is added to the current value.
- Apply Investment Return: The total amount (previous value + annual contribution) is multiplied by the expected annual return rate.
- Calculate Brokerage Fee: A percentage of the total investment for the year (initial + contributions) is deducted as a brokerage fee. This is applied at the start of the year's calculation for simplicity.
- Calculate Tax on Gains: Taxes are applied to the net gains made during the year (return minus brokerage fees).
- Update Value: The net gain (after tax) is added to the previous year's value.
Mathematically, for year 'n', the formula can be approximated as:
FV_n = (FV_{n-1} + C) * (1 + r) * (1 - b) - ( (C * (1 + r) * (1 - b) ) - C ) * t
Where:
FV_n= Future Value at the end of year 'n'FV_{n-1}= Future Value at the end of the previous yearC= Annual Contributionr= Expected Annual Return Rate (decimal form)b= Brokerage Fee Rate (decimal form)t= Tax Rate on Gains (decimal form)
Note: This is a simplified model. Actual returns can vary significantly due to market volatility. The brokerage fee is applied to the total investment amount for that year, and tax is calculated on the net profit.
Key Inputs Explained:
- Initial Investment Amount: The lump sum you start with.
- Annual Contribution: The amount you plan to invest each year.
- Investment Duration (Years): How long you intend to keep the investment.
- Expected Annual Return (%): The average yearly percentage gain you anticipate from your investments. Historical market averages are often around 7-10%, but this can vary widely.
- Brokerage Fee (% per transaction): The commission charged by your broker for buying or selling shares. This is applied annually for simplification in this calculator.
- Tax Rate on Gains (%): The percentage of your profits that you will owe to the government. This varies by jurisdiction and type of investment.
Use Cases:
- Retirement Planning: Estimate how much you might have for retirement based on your savings habits and expected market performance.
- Goal Setting: Determine if your investment goals (e.g., down payment for a house, funding education) are achievable within your timeframe.
- Comparing Scenarios: See how different contribution amounts, return rates, or time horizons impact your final investment value.
- Understanding Fees: Visualize the impact of brokerage fees and taxes on your overall returns.
This calculator provides an estimate and should not be considered financial advice. Always consult with a qualified financial advisor before making investment decisions.