Investment Calculator
Compound growth with contributions
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How Investment Returns Work
Compound interest is the process where earnings generate their own earnings over time. The longer your money is invested, the more powerful this effect becomes. At 7% annual return, $10,000 doubles in approximately 10 years without any additional contributions — and every contribution you add compounds separately from that point.
Regular contributions are often more important than the initial investment. Investing $500/month for 20 years at 7% produces $262,000 from contributions and $258,000 from interest — roughly equal. At 30 years, interest overtakes contributions dramatically: $180,000 contributed vs $428,000 in interest earned.
The Rule of 72
Divide 72 by your annual return rate to estimate how long your money takes to double. At 7%: 72/7 = 10.3 years. At 8%: 9 years. At 10%: 7.2 years. At 4%: 18 years. This works because 7% compounded annually is approximately 2x every decade.
Expected Returns by Asset Class
Historical averages (before inflation): S&P 500 index: ~10% nominal, ~7% real. Bonds (10yr Treasury): ~4-5%. Real estate: ~4-6% capital appreciation + rental yield. Gold: ~2-3% real long-term. Diversified global portfolio: typically 6-9% nominal depending on allocation.
Impact of Fees
A 1% annual fee on a 7% return effectively reduces your return to 6% — cutting roughly 14% of gains. Over 30 years on $10,000 initial: 7% = $76,123. 6% = $57,435. The $18,688 difference is entirely from fees. Index funds with 0.03-0.10% expense ratios dramatically outperform actively managed funds over long periods.
Inflation Adjustment
With 3% average inflation, a 7% nominal return is approximately 4% in real (purchasing power) terms. $100,000 that grows to $200,000 in 10 years at 7% only has purchasing power equivalent to ~$149,000 in today's dollars. Always consider real returns when planning long-term financial goals.
This calculator provides projections for illustrative purposes only. Investment returns are not guaranteed and actual results will vary. Past performance does not predict future results. All investing involves risk, including possible loss of principal.
Frequently Asked Questions
How does compound interest work on investments?+
Compound interest means you earn returns on your returns, not just on the original principal. Year 1: $10,000 at 7% earns $700, balance $10,700. Year 2: 7% of $10,700 earns $749, balance $11,449. The extra $49 in year 2 vs year 1 is compound interest at work. Over 30 years, this snowball effect is enormous: $10,000 grows to $76,123 without any additional contributions. Adding regular contributions accelerates this dramatically.
What is a realistic expected investment return?+
Historical annual returns (nominal, before inflation): S&P 500 index: ~10% per year (1926-present). S&P 500 real return (after inflation): ~7%. Balanced portfolio (60% stocks, 40% bonds): ~6-8%. Conservative portfolio: ~4-5%. Individual stocks: highly variable. For long-term planning, financial advisors typically model 5-7% real returns for stock-heavy portfolios. Using 7% nominal is common for retirement projections and aligns with recent index fund performance.
How much should I invest each month?+
The standard recommendation is 15-20% of gross income for retirement, including any employer match. For general wealth building: invest whatever remains after covering essential expenses and maintaining an emergency fund. Even small amounts matter significantly due to compounding: $100/month for 30 years at 7% grows to $121,997. $200/month grows to $243,994 — exactly double. The amount matters, but starting early matters more.
What is dollar-cost averaging?+
Dollar-cost averaging (DCA) is investing a fixed amount at regular intervals regardless of market conditions. When prices are high, you buy fewer shares. When prices are low, you buy more. Over time, this averages out your purchase price and reduces the risk of investing a lump sum at market peaks. It is also psychologically easier — you automate contributions and remove the temptation to time the market. Research consistently shows most investors underperform the market by trying to time it. Regular automatic contributions are the practical implementation of DCA.
What is the difference between nominal and real returns?+
Nominal return is the raw percentage your investment grows. Real return adjusts for inflation. Formula: Real Return = (1 + Nominal) / (1 + Inflation) - 1. Approximate shortcut: Real Return = Nominal - Inflation. At 7% nominal with 3% inflation: real return is approximately 4%. This matters for long-term planning because $1,000,000 in 2050 will have significantly less purchasing power than today. For retirement planning, always check whether projections use nominal or real returns.
Should I invest a lump sum or invest regularly?+
Research consistently shows lump sum investing outperforms dollar-cost averaging approximately 2/3 of the time when markets trend upward (which they do most of the time). A Vanguard study found lump sum investing beats DCA by an average of 2.3% over 12 months across US, UK, and Australian markets. However, the psychological comfort and risk reduction of DCA is real — if investing a lump sum would cause you to sell during downturns, DCA produces better real-world results. If you have a windfall and strong emotional discipline, lump sum is generally better mathematically.
What investment accounts should I use?+
Priority order for US investors: 1. 401(k) up to employer match (free money). 2. HSA if eligible (triple tax advantage: pre-tax in, grows tax-free, tax-free for medical). 3. Roth IRA up to annual limit ($7,000 in 2026, $8,000 if 50+). 4. 401(k) up to annual limit ($23,500 in 2026). 5. Taxable brokerage account. For non-US investors: use tax-advantaged accounts first (ISA in UK, TFSA/RRSP in Canada, etc.) before taxable accounts. The account type matters almost as much as the investment choices due to tax drag.
How does investment time horizon affect strategy?+
Short-term (under 3 years): stocks are too volatile. Use high-yield savings accounts, money market accounts, or short-term bonds. Medium-term (3-7 years): a mix of stocks and bonds is appropriate. Can handle some volatility with time to recover. Long-term (7+ years): higher stock allocation is appropriate — historically, the S&P 500 has never lost money over any 20-year period. The longer your horizon, the more risk you can take because you have time to recover from downturns. This is why target-date funds automatically shift from stocks to bonds as you approach retirement.
What is sequence of returns risk?+
Sequence of returns risk is the danger that poor investment returns early in retirement (when you start withdrawing) can permanently damage a portfolio even if long-term average returns are good. Example: two retirees both average 7% over 20 years, but one has bad returns early and good returns late, while the other is reversed. The one with bad early returns runs out of money significantly sooner due to withdrawals locking in losses. This is why a cash/bond buffer (2-3 years of expenses) near and early in retirement is critical — it allows you to avoid selling stocks during downturns.
How much do I need to retire?+
The most widely used rule is 25x your annual expenses (the inverse of the 4% withdrawal rule). If you spend $60,000/year, you need $1,500,000. At 4% withdrawal, this portfolio has historically lasted 30+ years with high probability. Factors that increase the needed amount: retiring early (longer time horizon), high spending, high taxes in retirement, uncertain health expenses. Factors that decrease it: Social Security/pension income, part-time work in early retirement, flexibility to reduce spending. Most planners recommend having 10x your final working salary saved by age 67.