Investment ReturnsMeeting your long-term investment goal is dependent on a number of factors. This not only includes your investment capital and rate of return, but inflation, taxes and your time horizon. This calculator helps you sort through these factors and determine your bottom line. Click the "View Report" button for a detailed look at the results.
Definitions
Years
The number of years you wish to analyze. This can be any
number from one to one hundred.
Rate of return
This is the annually compounded rate of return you
expect from your investments before taxes. The actual
rate of return is largely dependent on the type of
investments you select. For example, from December 2000
to December 2010, the annual compounded rate of return
for the S&P 500 was 0.899%, including reinvestment of
dividends. From January 1970 to December 2010, the
average annual compounded rate of return for the S&P
500, including reinvestment of dividends, was
approximately 10.05% (source:
www.standardandpoors.com).
Since 1970, the highest 12-month return was 61% (June
1982 through June 1983). The lowest 12-month return was
-43% (March 2008 to March 2009). Savings accounts at a
bank may pay as little as 1% or less but carry
significantly lower risk of loss of principal balances.
It is important to remember that these scenarios are
hypothetical and that future rates of return can't be
predicted with certainty and that investments that pay
higher rates of return are generally subject to higher
risk and volatility. The actual rate of return on
investments can vary widely over time, especially for
long-term investments. This includes the potential loss
of principal on your investment. It is not possible to
invest directly in an index and the compounded rate of
return noted above does not reflect sales charges and
other fees that funds and/or investment companies may
charge.
Compound Interest
Interest on an investment's interest, plus previous
interest. The more frequently this occurs, the sooner
your accumulated interest will generate additional
interest. You should check with your financial
institution to find out how often interest is being
compounded on your particular investment.
Initial investment
Total you currently have invested that should be
included in this analysis.
Inflation rate
What you expect for the average long-term inflation
rate. A common measure of inflation in the U.S. is the
Consumer Price Index (CPI). The CPI for 2010 was 2.4%,
as reported by the Minneapolis Federal Reserve. From
1925 through 2010 the CPI has long-term average of 3.1%
annually. Over the last 30 years highest CPI recorded
was 13.5% in 1980.
Annual investments
The amount you will contribute each year to your
investments. If you check the box to adjust this amount
for inflation, your annual investment will increase each
year by the inflation rate.
Tax rate
The percentage of your investment return you will pay in
taxes. Your taxes are assumed to be payable annually, at
the end of the year.
Compounded interest return
Total after-tax return if your investment profit is
compounded annually.
Simple interest return
Total after-tax return if your investment profit is
simple interest with no compounding.
Total invested capital
Total you have invested. This includes your initial
investment and all periodic investments.
Investment final total
Your investments total ending value. If you have checked
the box to show values after inflation, this amount is
the total value of your investment in today's dollars.
If this box is unchecked, it will show the actual value
of the investment.
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