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Investment Return & Growth Calculator

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NOV 8, 2022

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  • About This Answer

    Our investment calculator tool shows how much the money you invest will grow over time. We use a fixed rate of return. To better personalize the results, you can make additional contributions beyond the initial balance. You choose how often you plan to contribute (weekly, bi-weekly, monthly, semi-annually and annually) in order to see how those contributions impact how much and how fast your money grows. When we make our calculations, we also factor in compounding interest, showing how the interest you earn can then earn interest of its own.

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  • Our Assumptions

    RATE OF RETURN: We assume that your rate of return compounds based on the frequency at which you contribute.

    CONTRIBUTIONS: We assume that the contribution will occur at the end of the selected contribution period.

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  • Our Investing Expert

    Barbara Friedberg Investing

    Barbara Friedberg is an author, teacher and expert in personal finance, specifically investing. For nearly two decades she worked as an investment portfolio manager and chief financial officer for a real estate holding company. Barbara has a degree in Economics, a Masters in Counseling and an MBA in Finance. She is committed to investment and money education. The author of “Personal Finance: An Encyclopedia of Modern Money Management” and “How to Get Rich; Without Winning the Lottery,” Barbara has taught courses in corporate finance and investing at several universities. Her writing has been featured in U.S. News & World Report, Yahoo and Money. Barbara currently serves as SmartAsset’s investing expert.

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Investment Calculator

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Whether you're considering getting started with investing or you're already a seasoned investor, an investment calculator can help you figure out how to meet your goals. It can show you how your initial investment, frequency of contributions and risk tolerance can all affect the way your money grows.

Here’s a breakdown of the basics of investing, different risks to look out for and other factors to consider before putting your money to work.

A financial advisor can help you manage your investment portfolio. To find a financial advisor who serves your area, try our free online matching tool.

How Investing Works

Investing lets you take money you're not spending and put it to work for you. Money you invest in stocks and bonds can help companies or governments grow, while earning you compound interest. With time, compound interest can take modest savings and turn them into larger nest eggs, as long as you avoid some investing mistakes.

You don't necessarily have to research individual companies and buy and sell stocks on your own to become an investor. In fact, research shows that this approach is unlikely to earn you consistent returns. The average investor who doesn't have a lot of time to devote to financial management can probably get away with a few low-fee index funds.

People often put money into investments as a way to reach long-term goals. These could include reaching a financial milestone like buying a home, saving to pay for a child’s education, or simply putting away enough money for retirement. 

Financial investments are financial products that are bought with the goal of making money. Common financial investments include:

  • Stocks: Individual stocks are shares of a company that can increase in value as a company grows. Investors add them to their portfolios when they are prepared to take on additional risk in exchange for potentially higher returns.
  • Index funds: This asset is a portfolio of stocks or bonds that tracks a market index. It tends to have lower expenses and fees when compared with actively managed funds, and is based on a long-term strategy that relies on the market to outperform single investments.
  • Exchange-traded funds (ETFs): These combine features from stocks and index funds into a diversified investment that similarly tracks the returns of a market index and can also be traded. ETFs typically require smaller investments and also carry lower fees.
  • Mutual funds: This asset pools money from investors to buy a collection of stocks, bonds and other securities that are bundled and traded as one investment. These are typically best for retirement and other long-term investments.

How to Calculate Return on Investment (ROI)

Return on investment (ROI) allows you to measure how much money you can make on a financial investment like a stock, mutual fund, index fund or ETF.

You can calculate the return on your investment by subtracting the initial amount of money that you put in from the final value of your financial investment. Then you would divide this total by the cost of the investment and multiply that by 100.

While you can use ROI to determine how profitable a financial investment can be, you should note that it does not account for how much time that asset will be held. And depending on your time horizon and other financial needs, this is something you should keep in mind when calculating how much money you can earn.

Factors to Consider Before You Invest

All investments carry risk. Therefore, you should consider carefully how your investment can perform based on different factors. Here are five common factors that you should keep in mind to maximize potential returns on your investment.

Risk and Return for Investments

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The closer you are to retirement, the more vulnerable you are to dips in your investment portfolio. Conventional wisdom says older investors who are getting closer to retirement should reduce their exposure to risk by shifting some of their investments from stocks to bonds.

In investing, there's generally a trade-off between risk and return. The investments with higher potential for return also have higher potential for risk. The safe-and-sound investments sometimes barely beat inflation, if they do at all. Finding the asset allocation balance that's right for you will depend on your age and your risk tolerance.

Starting Balance for Investments

Say you have some money you've already saved up, you just got a bonus from work or you received money as a gift or inheritance. That sum could become your investing principal. Your principal, or starting balance, is your jumping-off point for the purposes of investing. Most brokerage firms that offer mutual funds and index funds require a starting balance of $1,000. You can buy individual equities and bonds with less than that, though.

Contributions for Investments

Once you've invested that initial sum, you'll likely want to keep adding to it. Extreme savers may want to make drastic cutbacks in their budgets so they can contribute as much as possible. Casual savers may decide on a lower amount to contribute. The amount you regularly add to your investments is called your contribution.

You can also choose how frequently you want to contribute. This is where things get interesting. Some people have their investments automatically deducted from their income. Depending on your pay schedule, that could mean monthly or biweekly contributions (if you get paid every other week). A lot of us, though, only manage to contribute to our investments once a year.

Rate of Return on Investments

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When you've decided on your starting balance, contribution amount and contribution frequency, you're putting your money in the hands of the market. So how do you know what rate of return you'll earn? Well, the SmartAsset investment calculator default is 4%. This may seem low to you if you've read that the stock market averages much higher returns over the course of decades.

Let us explain. When we figure rates of return for our calculators, we're assuming you'll have an asset allocation that includes some stocks, some bonds and some cash. Those investments have varying rates of return, and experience ups and downs over time. It's always better to use a conservative estimated rate of return so you don't under-save.

Sure, you could count on a 10% rate of return if you want to feel great about your future financial security, but you likely won't be getting an accurate picture of your investing potential. That would lead to under-saving. And under-saving often leads to a future that's financially insecure.

Years to Accumulate for Investments

The last factor to consider is your investment time frame. Consider the number of years you expect will elapse before you tap into your investments. The longer you have to invest, the more time you have to take advantage of the power of compound interest. That's why it's so important to start investing at the beginning of your career, rather than waiting until you're older. You may think of investing as something only old, rich people do, but it's not. Remember that most mutual funds have low minimum investments.

Places With the Most Incoming Investments

SmartAsset’s interactive investing map highlights the places across the country that have the most incoming investments. Zoom between states and the national map to see the places in the country with the highest investment activity.

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Rank County Business Growth GDP Growth ($ in millions) New Building Permits (per 1,000 homes) Municipal Bonds (per capita)

Methodology There are several ways individuals, governments and businesses can invest money in a county or region. Our study aims to capture the places across the country that are receiving the most incoming investments in business, real estate, government and the local economy as a whole. To do this we looked at four factors: business establishment growth, GDP growth, new building permits and municipal bond investment.

We looked at the change in the number of businesses established in each location over a 3-year period. This shows whether or not people are starting new business ventures in the county.

The second factor we looked at was the GDP growth. We used real growth (inflation adjusted) in the local economy.

We also looked at investment and development in the local residential real estate market. To measure this real estate growth, we calculated the number of new building permits per 1,000 homes.

The final factor we considered was investment in municipal bonds. We found total municipal bond debt raised by a county over the last five years, which we divided by the population. This gave us a per capita look at investment in local government.

We scored every county in our study on these four factors, weighting each factor equally. We then combined those scores to create a final ranking of cities. With that ranking, we created an index where the county with the most incoming investments was assigned a value of 100 and the county with the least investment activity received a zero.

Sources: U.S. Census Bureau County Business Patterns Survey, U.S. Bureau Economic Analysis, U.S. Census Bureau Building Permits Survey, Bloomberg