Investment Calculator: How It Works
This calculator projects what an investment becomes over time given a starting amount, regular contributions and an assumed return. The projection is straightforward arithmetic; the judgement is in the assumptions, and this page is mostly about choosing them honestly.
The two components
Growth of the initial amount:
FVlump = P × (1 + r)t
Growth of the regular contributions:
FVseries = C × [((1 + r)n − 1) ÷ r]
The total is the sum. In most real portfolios the second term dominates within about a decade, because contributions keep arriving while the initial sum compounds only once.
A worked projection
Start with 100,000, add 10,000 a month, assume 10% annually for 20 years:
| Initial amount grows to | 672,750 |
|---|---|
| Contributions grow to | 7,656,970 |
| Total projected value | 8,329,720 |
| Total contributed | 2,500,000 |
| Growth | 5,829,720 |
Fees compound against you
An expense ratio is charged on the whole balance every year, including on the gains. It is the mirror image of compounding.
| Annual fee | Net return on a 10% gross | Value after 30 yrs on 10,000/mo | Cost of the fee |
|---|---|---|---|
| 0.1% | 9.9% | 22,180,000 | — |
| 0.5% | 9.5% | 20,700,000 | 1,480,000 |
| 1.0% | 9.0% | 18,340,000 | 3,840,000 |
| 2.0% | 8.0% | 14,900,000 | 7,280,000 |
The difference between a 0.1% and a 2% fund is not 1.9% — over thirty years it is roughly a third of the final balance. Fees are the one variable in investing you can control with certainty, which makes them the highest-confidence improvement available to most investors.
Choosing a return assumption
| Asset mix | Defensible planning return (nominal, pre-fee) |
|---|---|
| Cash and short-term deposits | 2% – 5% |
| Government and high-grade bonds | 4% – 7% |
| Balanced 60/40 | 6% – 9% |
| Broad equity index | 8% – 11% |
These are planning figures, not forecasts. Two habits improve any projection: subtract your actual fees before entering the rate, and run a pessimistic case alongside the central one. If the plan only works at 12%, it is not a plan.
Nominal versus real
Every figure above is nominal. At 6% inflation, the 8,329,720 in the first example has the purchasing power of about 2,600,000 in today's money. Both numbers are true; only the second tells you what you can buy. For goal-based planning, either use a real return (nominal minus inflation) throughout, or inflate the goal to its future cost — but never mix the two.
What smooth curves conceal
The model applies the same return every year. Real markets deliver returns unevenly, and the order matters. Poor returns early in accumulation are survivable and even helpful, since contributions buy at lower prices. Poor returns late — when the balance is large and contributions are small by comparison — do the real damage. This is why risk is usually reduced as a goal approaches, and why the smooth line a calculator draws is the one thing about it you should not trust.