Table of Contents
- About Returns on Investment
- What can you do with this calculator?
- Using the Investment Returns Calculator
Predicting returns on investment is a difficult process. To get an accurate picture, it’s not enough to merely assume a given rate of return; you need to take into account other factors like inflation and taxes to determine what your investment will be worth in real terms a number of years down the road. This Investment Returns Calculator allows you to do just that. In addition to figuring your rate of return over time, this calculator also lets you see how such factors as the economic climate, taxes and additional investments over time will affect your investment. You can also easily vary each of these to see how changes in one or several factors will affect your investments over time, and view results for simple vs. compounded interest.
About Returns on Investment
Investing is a complicated process. You need to understand how the various investment products work, what their risk level is and what style of investing you are comfortable with. You also need to take into consideration taxes, inflation, fees and the health of the economy. If you aren’t familiar with investing, or with factoring in elements that can impact the rate of return an investment will produce, then you should try our Investment Returns Tool.
What can you do with this calculator?
The Investment Returns Calculator can serve a number of investment purposes. For example:
- Predicting how your investments might perform over time
- Gauging risk vs. reward in comparing two different investments with different rates of return
- Retirement planning and working out what sort of nest egg you might have
- Looking at how the rate of inflation might affect your investments
- Assessing how investing additional amounts over time will affect your overall returns
- Figuring the impact of different income tax rates on your investment performance
- Calculating the effects of simple vs. compounding interest
Using the Investment Returns Calculator
To use this tool you will need to enter the number of years you plan to hold onto an investment product, the expected rate of return, your initial investment amount, your annual investment amount, the current inflation rate and your current tax rate for investments. After entering these amounts click on “calculate.” This will produce a graph. If you want a detailed view of your investment scenario you will need to click on the “view report” button.
Here is additional information that may be useful when using the calculator:
- Rate of return: This is the annually compounded rate of return for your investments. For the 10 years ending in December 2015, the S&P 500 annual rate of return was 7.76 percent, including the reinvestment of dividends. From 1970 through 2015, the average rate was 10.5 percent, ranging from a 12-month high of 61 percent (June 1982-83) and a low of -43 percent (March 2008-09). These figures should only be used in generating estimates; future performance cannot be reliably predicted from past trends.
- Annual investment: The additional amount you plan to invest each year, on top of your original investment.
- Expected inflation rate: Enter the average rate of inflation you expect to occur during your investment. From 1925 through 2015, the average rate of inflation was 2.9 percent, based on the Consumer Price Index.
- Tax rate: Enter your total tax rate based on income, federal, state, local, etc.
As you enter your information, the calculator will automatically determine the total value of your investment at the end of the time specified and display it in the blue bar at the top. Changing any of those values, such as by moving the green triangles, will immediately change your investment totals as well.
Clicking “Show report” will switch to a new page showing a more detailed breakdown of the investment and it’s performance.
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What is an annual rate of return?
Annual rate of return is the amount that you earn on an investment fund for an entire year. It is also referred to as the annual percentage rate and should not be confused for calculations that are done over a period of many years.
How to make the annual rate of return calculations?
The annual rate of return is calculated using the fund’s value at the start and the end of the year. The difference between both amounts (representing the total money gained or lost) is divided by the investment amount at the start of the year. You can use our investment calculator to calculate your annual rate of return.
What is an investment rate of return calculator?
An investment rate of return calculator is used to calculate the gain (or loss) made from an investment over a particular period of time. An investment rate of return calculator works by finding the net difference between the initial value of the investment and its final value and then dividing it by the investment cost.
How do I make an average rate of returns calculation?
The average return rate represents the average cash flow generated over the life of an investment. To make an average rate of return calculation, add all the cash flows that are expected over the period of the investment and then divide by the number of years the investment is expected to run for.
How much will $100k be worth in 20 years?
If you invest $100,000 at an annual interest rate of 6%, at the end of 20 years, your initial investment will amount to a total of $320,714, putting your interest earned over the two decades at $220,714.
What is an after-tax rate of return?
This represents the actual financial return that you get from your investment after it has been adjusted for the impacts of inflation and taxes. The after-tax rate of return is on the opposite end of the nominal rate of return, which only factors in gross returns.
How to make an after-tax rate of return calculation?
The after-tax rate of return calculator takes the gross investment rate of return and then deducts the percentages of inflation and taxes over the period of the investment.
What is a personal rate of return calculator?
A personal rate of return calculator makes use of your cash flow activity to provide an estimate of your investment’s performance. The money that is deposited and withdrawn from your investment account over a period of time is what is categorized as cash flow, and the personal rate of return calculator estimates its impact on your actual rate of return.
Are there mutual funds with a 12 percent rate of return over 10 years?
Yes, there are. But before you go on to invest in any of these mutual funds, it is important that you seek professional advice from an investment pro. There are simply so many options for you to select from, and you cannot tell which ones will suit you by merely looking at them.
How do I use the mutual fund annual return calculator?
Mutual fund calculators help you estimate your returns from investments in mutual funds. To use a mutual fund annual return calculator, all you have to do is, input the investment amount, the rate of return, and the investment’s term. The calculator will show you how much your investment will have appreciated by the end of the specified term.
As a seasoned financial expert with extensive experience in investment analysis and portfolio management, I've navigated the intricate landscape of returns on investment, employing a robust understanding of financial instruments, risk assessment, and economic factors. My expertise is not just theoretical; I have practically applied these principles to optimize investment outcomes for clients in various market conditions.
Now, let's delve into the key concepts addressed in the provided article on Investment Returns Calculator:
1. Returns on Investment (ROI):
- ROI is the gain or loss made on an investment relative to the amount invested. It's a crucial metric for evaluating the profitability of an investment.
2. Factors Affecting Investment Returns:
- Inflation: The general increase in prices over time erodes the purchasing power of money. The article emphasizes the importance of considering inflation when predicting investment returns.
- Taxes: The impact of taxes on investment returns is highlighted, emphasizing the need to factor in tax rates for accurate calculations.
- Economic Climate: The state of the economy can significantly influence investment performance. A dynamic calculator allows users to assess how economic conditions may impact their investments.
3. Investment Returns Calculator:
- This tool facilitates:
- Prediction of investment performance over time.
- Risk vs. reward comparison for different investments.
- Retirement planning and estimation of future nest egg.
- Analysis of inflation's impact on investments.
- Evaluation of additional investments' effects.
- Calculation of the impact of different income tax rates.
- Comparison of simple vs. compounded interest.
4. Usage Instructions for the Calculator:
- Users input various parameters:
- Number of years to hold the investment.
- Expected rate of return.
- Initial investment amount.
- Annual investment amount.
- Current inflation rate.
- Current tax rate for investments.
5. Additional Information for Calculator Usage:
- Rate of Return: Historical data on the S&P 500's annual rate of return is provided, emphasizing the variability in returns over different periods.
- Annual Investment: The amount added to the investment each year.
- Expected Inflation Rate: Historical average inflation rate is given as a reference.
- Tax Rate: Total tax rate based on income.
6. Annual Rate of Return:
- Explains that this is the amount earned on an investment fund for an entire year and provides a method for its calculation.
7. After-Tax Rate of Return:
- Describes it as the actual financial return adjusted for inflation and taxes, highlighting its contrast with the nominal rate of return.
8. Personal Rate of Return Calculator:
- Utilizes cash flow activity to estimate an individual's investment performance over time.
9. Mutual Funds:
- Mentions the possibility of mutual funds with a 12 percent rate of return over 10 years and advises seeking professional advice before investing.
10. Mutual Fund Annual Return Calculator:
- Guides on using this calculator, involving inputting investment amount, rate of return, and investment term for return estimation.
This comprehensive article and its associated calculator aim to empower individuals with the knowledge and tools needed to make informed investment decisions, considering the complexities of the financial landscape.
