Many situations may arise where an investment calculator could be of use. You might want to know how long it takes to make a profit. Or you might need spare money and have to dip into your investments to find it. Whatever the reason, the capabilities of such a tool will surprise you.
Enter the information relating to your investment, interest rate, and duration, and the tool will take care of the rest.
Using an investment calculator may be easier than you think. Follow these steps below, with an example to follow.
1. Establish your initial investment figure
2. Work out a contribution you want to add to it
3. Know your investment interest rate
4. Determine your investment’s length
5. Consider the growth from the interest rate
6. Learn your final balance
If you’re having trouble using the investment calculator, this example may help.
1. Your initial investment is $1,500.
2. You earn three percent of interest annually.
3. You contribute $100 to the initial investment monthly.
4. Your investment duration is five years.
5. In five years, your final balance will be $8,207.10. In your first year, you earn $62 in interest. With your three percent interest rate over five years, you have $707 in interest by year five.
As time passes, you can refer to this investment calculator to work out how well your investment is doing.
Let’s say you want to work out your investment’s final balance after a few years. How would you do it?
Final balance = the initial amount x (1 + interest rate / compound frequency) ^ (compound frequency x years).
The “+1” part stands for one year. Most banks calculate interest annually.
When you start involving compound interest, the process becomes more challenging. Compound interest occurs is when you earn income on the new sum of money rather than the initial principle.
An example would be if you earn interest in one year on $1,000. That interest, at three percent, is $30. In year two, you earn interest on $1,030. You receive $30.90 in that second year, and so on.
ROI is a financial term that’s common in the investment world. It means return on investment. An ROI tells you about the performance and return on your investment.