💹 Investment Calculator
Project your wealth growth with compound returns and regular contributions. Compare conservative vs aggressive scenarios, and see what inflation actually does to your purchasing power.
Why Invest?
Keeping money in cash is not "safe" in any meaningful long-term sense — inflation erodes its purchasing power every year. At 3% annual inflation, $100,000 today is worth only $74,000 in real terms after 10 years. Investing is how individuals protect their purchasing power over time and build long-term wealth. The goal of this calculator is to make those abstract projections concrete and personal.
Expected Returns by Asset Class
Historical long-run returns vary significantly by asset class. These figures represent approximate annualised real (inflation-adjusted) returns from broadly diversified index funds, not individual stocks or actively managed funds:
| Asset Class | Nominal Return (approx) | Real Return (after ~3% inflation) | Risk Level |
|---|---|---|---|
| Cash / Savings Account | 3–5% | 0–2% | Very Low |
| Government Bonds | 3–5% | 0–2% | Low |
| Corporate Bonds | 4–6% | 1–3% | Low–Medium |
| Global Equities (index) | 7–10% | 4–7% | High |
| US Equities (S&P 500) | 9–11% | 6–8% | High |
| Real Estate (REITs) | 7–9% | 4–6% | Medium–High |
The Impact of Fees on Investment Returns
Investment fees compound just as returns do — but in the wrong direction. A fund with a 1% annual expense ratio might seem trivial, but over 30 years it can reduce your final portfolio by 20–25% compared to a 0% fee equivalent. This is why low-cost index funds have become the dominant recommendation among financial economists.
| Annual Fee | $10,000 invested at 7% after 30 years | Cost vs 0% fee |
|---|---|---|
| 0% (index fund) | $76,123 | — |
| 0.1% (low-cost ETF) | $73,955 | −$2,168 |
| 0.5% | $66,439 | −$9,684 |
| 1.0% | $57,435 | −$18,688 |
| 1.5% | $49,268 | −$26,855 |
Dollar-Cost Averaging
Dollar-cost averaging (DCA) means investing a fixed amount at regular intervals — monthly or bi-weekly — regardless of market conditions. When prices are low, your fixed contribution buys more shares; when prices are high, it buys fewer. Over time, this smooths your average purchase price and removes the psychological pressure of trying to "time the market."
Research consistently shows that DCA produces outcomes nearly identical to perfect market timing for most investors — and dramatically outperforms the outcomes of investors who let fear and greed drive their timing decisions. Automated monthly contributions, set-and-forget, is the most practical implementation.
Tax-Advantaged Accounts
The account type in which you hold investments significantly affects your after-tax returns. In the US, the main tax-advantaged options are:
- 401(k) / 403(b): Contributions are pre-tax (traditional) or post-tax (Roth). Employer matching is essentially a guaranteed 50–100% return on the matched amount — always contribute enough to capture the full match first.
- IRA (Individual Retirement Account): Traditional IRA contributions may be tax-deductible; Roth IRA contributions grow and are withdrawn tax-free. 2024 contribution limit: $7,000 ($8,000 if age 50+).
- HSA (Health Savings Account): Triple tax advantage — contributions are tax-deductible, growth is tax-free, and withdrawals for medical expenses are tax-free. Often called the best retirement vehicle available.
Risk Tolerance and Asset Allocation
How you divide your portfolio between stocks (equities), bonds, and other assets — your asset allocation — is the single most important investment decision you make. It determines both your expected return and the volatility you'll experience along the way.
A popular starting point is "110 minus your age" as a percentage to hold in equities. A 30-year-old would hold 80% equities and 20% bonds. As you approach retirement, you shift toward more stable assets to reduce sequence-of-returns risk. Target date retirement funds automate this process with a "glide path" that gradually becomes more conservative as your target date approaches.