Calculate how much you could save or earn with compounding interest over time. Input your starting amount -or “initial investment”, how much you will be contributing and how often, the interest rate to be applied, and the number of years it has to compound (grow). As you try different numbers you will see how much your balance will increase over time.
How to use MoneyWellth’s Investment Return Calculator
Understanding how an investment can grow over time is helpful when evaluating a specific kind of investment and where your money is best invested. There is a long list of the different kinds of investments available to you – ranging from stocks and bonds, to mutual funds and treasury bills. Here are the 5 simple steps for using the investment calculator:
Enter an initial investment:If you have some money set aside or coming to you in the near future – include it in the “Initial Amount” field. If you don’t have anything yet, you can input $0 here
Enter your recurring deposits:Enter the amount you plan to invest regularly. If you want to invest a certain amount every day or once a month into your investment account (known as dollar-cost averaging), select the frequency that fits your investment schedule. If you prefer to invest one large sum each year, choose “annually” and include your planned annual contribution. If you do not wish to make regular contributions, select either option and enter $0.
Choose how long your investment will grow:Choose the length of time you plan to keep your investment. Consider factors such as your financial goals, risk tolerance, and investment strategy when selecting the investment period.
Select an Interest Rate:Input the annual interest rate, or rate of return, you expect to receive on your investment. Keep in mind that different investments have different rates of return. For example, stocks may yield higher returns but come with higher risks, while bonds may offer lower returns but are considered safer investments.
Review and Analyze the Results:Take time to review and analyze the results provided by the investment calculator. You may discover that adjusting variables, such as the interest rate, investment period, or contributions, can significantly impact your investment’s growth. Use these insights to optimize your investment strategy and achieve your financial goals.
Important Note: The Power of Compounding Interest
If you’re seeking to build wealth over time, there’s no greater ally than compounding interest. Compounding interest is a powerful force that can turn small, consistent investments into massive savings, and it all starts with understanding how it works.
Compounding interest is the process by which the interest earned on an investment or savings account is reinvested, generating additional interest on top of the initial principal amount. In other words, it’s interest earned on both your initial investment (principal) and the interest that has already been accumulated, often referred to as “interest on interest”.
For example, if you invest $1,000 at an annual interest rate of 5%, you’ll earn $50 in interest after one year, bringing your total to $1,050. In the second year, the interest is calculated on the new balance of $1,050, so you’ll earn $52.50 in interest, making your new balance $1,102.50. This cycle continues, and with each passing year, your investment grows at an increasingly faster rate.
How to Invest your Money & Things you Should Know
- Top 5 Investments for Beginners
- The Fastest way to Lose Money
- Investing in the Stock Market
- Why you should do your Research
4 Reasons You Should Invest your Money
Investing is one of the most effective ways to build long-term wealth and achieve financial goals. Saving money is an important first step, but simply storing your money in a savings account won’t make your money work for you. Instead, investing your saved money can help grow your wealth over time.
- Beat inflation: Inflation is the rate at which the price of goods and services increases over time. If your money isn’t earning any interest, it’s actually losing value over time due to inflation. Over the past 50 years, the average annual inflation rate was 3.8%. Investing your saved money can help keep up with or even beat inflation, ensuring that your money isn’t losing value but rather grows over time.
- Compound interest: AS described above and demonstrated with the Investment Calcultor, compound interest can be a powerful tool for building wealth over time. The earlier you start investing, the more time your money has to compound, making it even more valuable.
- Diversification: Investing your saved money can provide diversification and reduce risk. By investing in a mix of stocks, bonds, and other assets, you can spread your money across different investments and reduce the risk of losing all of your money in any one investment.
- Long-term growth: Investing your saved money can help you achieve long-term financial goals, such as retirement or buying a home. By consistently investing over time, you can grow your wealth and achieve financial security for the future.
Top 5 Investments for Beginners
If you’re looking to learn about stocks and easy investments, there are plenty of options available to you. Stocks are a type of investment that provides ownership in a company and the potential for profit through capital appreciation or dividend payments. Here are our top 5 easy investments for beginners:
- Low-cost index funds: Index funds are a type of mutual fund that tracks a specific index, such as the S&P 500. They provide instant diversification and have low fees, making them an excellent option for beginners who want to invest in stocks but don’t want to pick individual stocks themselves.
- Exchange-Traded Funds (ETFs): ETFs are similar to index funds, but they trade on an exchange like individual stocks. They are also highly diversified and have low fees, making them an easy investment option for beginners.
- Blue-chip stocks: Blue-chip stocks are shares of large, well-established companies with a strong history of stable earnings and dividends. These companies are often leaders in their industries and tend to be less volatile than other stocks. For beginners, blue-chip stocks can provide a stable foundation for a portfolio.
- Bonds: Bonds are a type of investment that allows individuals to loan money to companies or governments in exchange for interest payments. Bonds tend to be less risky than stocks, making them an easy investment option for beginners. Treasury bonds are considered some of the safest investments available.
- Real Estate Investment Trusts (REITs): REITs are companies that own and operate real estate properties, such as apartment buildings, shopping centers, and office buildings. Investing in REITs can provide exposure to the real estate market without the hassle of owning physical property. REITs also tend to have high dividend yields, making them an easy investment option for income-focused investors.
The Fastest Way to Lose Money Investing
Investing can be a powerful tool for building long-term wealth, but it requires patience and a long-term perspective. One of the most important things to keep in mind when investing is that you should only invest money you cannot afford to touch for at least 10 years or more.
Over 80% of retail traders, or everyday people – lose money in the stock market when buying and selling short term. If you’re interested in investing your money and building wealth the key is to only buys stocks if you plan to hold them long term.
The reason for this is simple: investing requires time to work. Short-term fluctuations in the market can cause anxiety and tempt investors to make impulsive decisions, but over the long-term, the market tends to move in an upward direction. By holding onto your investments for a long period of time, you give them time to grow and recover from any short-term losses.
Instead, the best strategy is to invest in a diversified portfolio of stocks and bonds and hold onto them for the long-term. By investing in a diversified portfolio, you spread your risk across multiple investments, which helps reduce the impact of any one investment on your overall portfolio. By holding onto your investments for the long-term, you give them time to grow and recover from any short-term losses.
Investing in the Stock Market
Access to investing and the stock market has never been easier with apps like Robinhood and TD Ameritrade. In this video we explore what exactly is a stock? How stocks work, and some important facts and tips for investing in the stock market
Do your Research Before Investing
Investing can be a great way to build wealth and achieve financial goals, but it also comes with risks. To minimize these risks, it’s crucial to do your research and gather reliable information before making any investment decisions.
One of the biggest risks associated with investing is the potential for losing money. Investments can be volatile, and there are no guarantees of returns. This is why it’s essential to do your research and understand the risks associated with each investment before putting your money into it.
When doing your research, it’s essential to gather information from reliable sources. There is a lot of misinformation out there, and it can be challenging to differentiate between reliable sources and those that aren’t. It’s essential to do your due diligence and verify the sources of your information before making any investment decisions. This is why at MoneyWellth we will never provide misleading information, or guidance that is not in your best interest.