Investment Calculator

What this calculator tells you

Most people invest in stages rather than all at once. They start with a sum of money and add to it regularly from their income. This calculator shows the value of a starting amount with yearly contributions, growing at an assumed annual return, after a chosen number of years.

It is a planning tool. The result shows what a consistent saving habit could build over time, and how much of the final value comes from your own contributions compared with the growth on them.

How the value is worked out

The starting amount grows at the assumed return for every year. Each yearly contribution also grows, but only from the year it is paid in. The total is the starting amount grown over the full term, plus the future value of an annuity made of the yearly contributions. The calculator assumes contributions are made at the end of each year, which is the standard convention for this type of projection.

A worked example

Suppose you start with 10,000, add 2,000 at the end of each year, and earn 6% a year for ten years. The starting sum grows to about 17,908. The contributions grow to about 26,362. The total is about 44,270. Of this, 30,000 is money you paid in, and the rest, about 14,270, is growth.

Contributions versus growth

Early in an investment, most of the value comes from the money you put in. Over long periods, growth takes a larger share. This is why the length of time matters, and why starting earlier, even with smaller contributions, often produces a larger result than starting later with bigger ones. Compare the total contributed with the growth to see how much of the outcome depends on your saving and how much on returns.

Assumptions and limits

The calculator uses one fixed return and assumes contributions arrive on schedule and are not withdrawn. Real returns vary, and a poor sequence of years can leave the result well below the average. Inflation reduces what the final amount can buy, so the real value is lower than shown. Fees, taxes on gains and charges on the account are not included unless you reduce the return to allow for them.

A contribution made at the start of each year grows slightly more, so the figure is a conservative estimate if you invest at the start.

Starting with a realistic plan

Choose the yearly contribution first, based on what you can keep up for the whole period, then test the return. A plan that depends on a contribution you cannot sustain will fail, even if the return assumption is correct. Build in room for lower contributions in difficult years and increase them when income rises.

Review the plan at least once a year. Compare the actual value with the projected value, and adjust the contribution or the target if the gap is large. Small corrections made early are much easier than large ones made close to the goal date.

Using the result

Use the calculator to set a monthly or yearly saving target for a goal, and test a range of returns to see how sensitive the outcome is. A lower return than you expect is a useful test, because it shows whether the plan still works if markets disappoint.

What to do when the plan falls behind

If the actual value falls below the projection, do not automatically increase the return assumption to close the gap. Check whether the contribution has been paid on schedule, whether fees have been higher than expected, and whether the return has really been lower. Then decide whether to increase the contribution, extend the period or accept a smaller goal. Making a decision based on the real numbers is more reliable than adjusting the assumptions.