How the investment calculator works
Two formulas cover almost every retail investing scenario. A one-time investment of amount P compounded annually at rate r for n years grows to FV = P × (1 + r)^n. A stream of equal monthly contributions C — a systematic investment plan (SIP) — accumulates to FV = C × ((1 + i)^m − 1) / i × (1 + i), where i = r/12 is the monthly rate and m is total months. This tool applies both simultaneously so you can model a lump sum, a SIP, or any combination.
Worked example — lump sum vs. SIP
Two investors each put $60,000 into an S&P 500 index fund over 10 years at a 9% expected return. Investor A invests $60,000 upfront on day one. Investor B invests $500/month for 120 months. Investor A ends with roughly $142,000. Investor B ends with roughly $96,750. The lump sum wins because every dollar compounds from day one — SIP dollars invested in month 100 only get 20 months to grow. But this comparison assumes markets rise steadily; in real drawdowns the SIP buys more shares at lower prices, and its risk-adjusted returns often improve.
| Annual return | Total contributed | Future value | Growth |
|---|---|---|---|
| 4% | $120,000 | $183,370 | $63,370 |
| 7% | $120,000 | $260,463 | $140,463 |
| 10% | $120,000 | $379,684 | $259,684 |
| 12% | $120,000 | $494,463 | $374,463 |
CAGR: turning a total return into an annual rate
If you started with $10,000 and ended with $20,000 after 8 years, your compound annual growth rate is CAGR = (20000/10000)^(1/8) − 1 ≈ 9.05%. CAGR is the constant rate that would have produced the same ending value with smooth growth — useful for comparing investments with different holding periods, but it hides year-to-year volatility. A fund that returns +50%, −40%, +50%, −40% ends near zero even though its arithmetic average is +5%.
The three assumptions that dominate results
- Expected return. Long-run U.S. stock market real return has been about 6.5%–7%. Nominal returns of 10% include inflation, which erodes purchasing power.
- Fees and taxes. A 1% annual fee reduces a 40-year ending balance by roughly 25%. Tax drag on taxable accounts can subtract another 1%–2% per year.
- Contribution consistency. Missing three years of SIP contributions in a 30-year plan can cost 10%–15% of the final balance, depending on when they're missed.
Return is an assumption, not a promise
Every investment calculator applies a single average return every year. Reality delivers wide swings: the S&P 500 has had calendar-year returns from −37% (2008) to +38% (2013) in the last two decades. Use a 4%–7% real return for a diversified stock-heavy portfolio, 2%–4% for a balanced portfolio, and be honest that individual years can be far above or below. The SEC requires prospectuses to note that past performance does not guarantee future results for exactly this reason.
How to use this investment calculator
- Enter the initial lump sum, if any.
- Enter the monthly contribution amount for the SIP portion.
- Set the expected annual return (aim for a real, after-inflation rate).
- Set the number of years you plan to stay invested.
- Read the projected future value plus the split between contributions and investment growth.
Companion tools
Isolate the pure math of compounding with the compound interest calculator, project against a target retirement date with the retirement calculator, and convert nominal returns into today's dollars with the inflation calculator.