The investment calculator is a simple tool which you can use to help you estimate how much profit an investment will yield in the future, taking into account a fixed interest rate and the duration of your investment. You can calculate both the final balance of your investment and total interest. It also lets you determine these quantities while including a monthly contribution to your initial investment.
If you are interested in property investment, you may check our cap rate calculator which can help you to evaluate a property.
Why use the investment calculator
Have you ever asked yourself whether you should make an investment or which product to choose? Planning the trip of a lifetime and wondering if you can save the necessary sum? Are you on track with your financial goals? In all of these situations our investment calculator might come in handy. All you need to know is: how much you want to invest, what is the interest rate and how long are you willing to wait for a return on your investment.
How to estimate the future value of your investment
- Determine how much are you willing to invest initially.
- Decide whether you want to contribute a specified amount of money to the initial sum.
- Find out what the interest rate on your investment is.
- Determine the duration of your investment.
- Do a series of multiplications taking into account the growth of the sum being the base of the interest rate.
- Find out what your final balance is.
Let's try it on a simple example.
Your initial investment is $100.
The yearly interest rate is 5%.
To make it easier - you do not plan to contribute any amount of money during the period of your investment.
The duration of your investment is 3 years.
By investing $100 at a 5% interest rate you will have `$105 = $100 EUR * 5%'
By the beginning of the second year your investment sum already equals $105. You need to multiply it by 5% again, to get roughly $110.
By the beginning of the third year your investment sum equals $110. You multiply it again by 5% and you get $116.
If you're planning to invest for a longer time, you need to carry out this operation every year. Or... you could simply use our investment calculator to do it quicker. You can then check what percentage of the initial amount you have earned. You can do this by using our percentage change calculator. This way, you can compare different investments and choose one that gives you the best deal!
Interest on investment formula
If you want to know how to calculate the final balance of your investment over a period of time, the equation is the same for any asset:
final_balance = initial_amount * (1 + interest_rate / compound_frequency)^(compound_frequency * years). The time period will usually be one year as interest rates are often calculated annually. There are also other equations used to estimate various investments. Their complexity depends on how many variables you want to take into consideration (effects of inflation, changing interest rates etc.). If you need more information you can check out this page where you can find formulas for periodic compounding and continuous compounding, but also interest calculations on mortgage rates etc.
Investment calculations based on compound interest
Compound interest is one the most powerful concepts in finance, and most financial/investment products are based on this. Compound interest is where you take the interest you make every year/month (depending on the compound frequency) and add it to your initial investment sum. This way money you invested grows at an increasing rate. Using our example above, the interest after one year is not calculated for the initial sum of $100 but instead on the $105 that you already made. Calculating future value of an invested sum with compound interest can be a bit tricky, so you might want to use our compound interest calculator.
Return on investment
Another popular term used in finance is known as return on investment (ROI). ROI tells you how efficient your investment is or allows you to compare the performance of a couple of investment options. This calculation is done by checking how much return on your investment will you get taking into account the costs. ROI is expressed as a percentage ratio.