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What Is An Investment Return Calculator

12 January 2024

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The main objective of any investment is to gain more money than you put into it. The profit or loss you incur out of it is your "return on investment”. An investment calculator can be utilized to estimate how much your acquisition could grow over a period! So, let’s say you want to know what the best investment plan for 3 years is. You can use a calculator to evaluate different plans and find out.

Managing your finances can be a difficult task especially when you have multiple sources of income. An investment calculator makes the monitoring of your investment effective and instinctive. With this, you will be able to create investment goals by entering a few figures. It helps in simplifying the decision-making process so you can plan your finances without any hassles, so let us learn more about an investment return calculator.

Investment term that you should know

Return rate
This is something that matters the most to many investors. It comes across to be a plain percentage on the shell but it is the stiff numeral that is employed to analogize the magnificence of assorted kinds of financial investment.
Starting amount
Also called the principal amount, the starting amount can vary based on the kind of investment. While it can be small or reasonable when it comes to stocks and mutual funds, it can also be a large amount when it’s for purchasing a home or similar asset.
End amount
The amount that one desires at the end of the investment.
Investment length
This is the period for which an investment is made. Generally, the risk factor increases for a longer period of investment due to the unanticipated fate. On the contrary to this, the more time involved in an investment there will be more compounding of return which can lead to greater rewards. In most cases, proper analysis of past trends and market conditions can help determine investing for what duration can yield the highest returns.
Additional contribution
It is commonly referred to as an annuity payment. Although investment can be made without them. Moreover, the additional contribution during the life of the investment will lead to higher-end value.
Liquidate
The transformation of your assets or property into cash by trading them in the open market.
Liquidity
It refers to how quickly your acquisition can be liquidated or sold for cash.
Net gain
It refers to the amount of money that is earned on an investment (it does not include the amount that is paid for the investment).
Net loss
The amount that is lost on an investment is referred to as net loss. It means that the returns are lesser than the amount invested initially.
Investment budget
The capital that one can pay for and handle comfortably while investing.
Investment Portfolio
It includes all of the investments that one holds including stocks, bonds, mutual funds, retirement funds and many more.

What is an Investment Calculator

A simple Google search will show you tons of virtual investment calculators that can help determine the returns you can get on various kinds of investments. The working for most of these is quite similar. You need to enter your initial investment, any additional contribution, the overall period and your expected return to get an idea of how much your investment might grow after a certain time. Moreover, for most acquisitions, you will want to opt for day-to-day compounding.

How to use the investment growth calculator

The investment calculator is very simple to use and easy to analyze. Here's a list of steps that will help you to use it efficiently:

Enter the starting amount
This is the initial step wherein you are required to enter the amount you opened the investment with. For example, if you are starting the investment with Rs.80,000 then enter Rs.80,000 in the first box.
Indicate the time
Here you will enter the amount of time that you intend to hold your investment. Generally, investments that mature for a longer period are more advantageous than the ones that are dealt with faster.
Enter the rate of return on your investment
This refers to the expected gain or loss on an investment over a period. It is calculated as a percentage. Here's a formula that can be used to calculate the rate of return:
Rate of return= [Current value of the investment-Initial value of investment] x 100
It is important to note that the rate of return may fluctuate over time due to unpredictable factors like investment security, federal interest rate and stock market changes.
Fill in the Contribution Amount
While contributing to the investment budget regularly, you will have to enter how much you commonly invest and how frequently you do so!

Why should one invest?

Investing might seem to be a game of numbers but frankly speaking, it can be a great task to keep up with it after a certain period. This is when the investment calculator comes as your saviour. It gives you a rough idea of how your investment will perform in future and what returns can a person expect for the stakes that they have funded. Below are some of the major advantages that make investing something that everyone should do:

To make long-term capital
This is one of the most crucial reasons to go for investing. It gives you the security that is required to lead a happy and prosperous life. Let's say for example at a certain stage of your life you want to leave your regular job and start your own business. You will hesitate to go for a career switch if you don't have minimum reserves to skimp on right? However, it will be easy for you to go for it if you have a strong investment portfolio.
To be financially stable after retirement
Everybody's life comes to a point wherein they retire or like to retire and relish the time on their stints. But for this, attaining financial independence becomes very important. Going for pension plans can be a great start but investing in a big retirement portfolio can help you attain this in less time frame.
Buying expensive commodities
Buying a house or a car or travelling may all seem to be impossible for a person who does a daily job. So, to turn such dreams into reality you for sure need many sources of income. Here's when the returns that you get from the investment come in. By having this side income, you become more stable financially and can be pleased with occasional fling as well.
Beat Inflation
The continuous rise in the cost of living over the period is called inflation. It can affect one's financial well-being. One of the best methods to outpace inflation is to induce positive real returns over the longer term by investing. As it will not only deliver higher income returns but also offers the potential for capital growth.
By now you must have got the idea about the importance of investing. But might be wondering where to invest to gain maximum benefits. So the investment calculator can be of great help to you. You can use an investment calculator to get a rough idea of the returns that you will get from equities, shares, mutual funds, real estate, gold etc.

Conclusion

As the investment calculator helps you to determine the amount to invest plus where to invest it could be a great alternative to go with. You can choose the best among a lot of options that are available such as mutual funds, SIPs, security markets and insurance agencies.

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Frequently Asked Questions on Investment Return Calculator

How can I calculate investment?

This can be done by subtracting the initial purchase price from the selling price. Then divide the amount obtained by the original purchase price. Finally, multiply it by 100 to get the per cent change in investment.

What are the different types of investments that one can invest in?

There are numerous types of investments that you can choose from this including: Stocks: It is also referred to as equity. It is a security that depicts the ownership of a fraction of the issuing firm. Bonds: These represent the loan made to the issuer. Governments and corporations use these commonly to borrow money. Mutual funds: Here the investors pool their money to earn high returns on their capital. Exchange-traded funds: Also known as ETFs are a collection of various securities such as bonds, share markets etc.

There are other investment options as well these include real estate, retirement funds etc. Each type has its advantages and disadvantages. Therefore one needs to consider their financial situation to find the right investment option for them!

What will happen if I stop making contributions in the future?

If you plan to change your investment strategy the outcome of your initial calculation will change. Moreover, if you are planning to change your investment strategy then it is recommended to contemplate these changes and make use of an investment calculator to get an updated perspective of your investment.

How do taxes impact one's investments?

There are two ways in which taxes can impact your investments these are:

Taxes may alter your investable payment: As it is evident that taxes always reduce our annual income. Therefore, the money that you can afford for investment also reduces typically. Further to make things work in your favors you can always plan to invest the money that you get back on your tax refund. Although the tax refund is not the extra money, it is the amount of money that you have overpaid.
Taxes can reduce the value of your investment: Long-term investment gains are typically taxed at a lower rate while the income from interest is generally taxed as ordinary income. Plus, this also depends on the state in which you are living. Also, as the tax regulation and rates depend on various factors the investment calculator can be used to check the impact of taxes on your investment.

How can I calculate my initial investment in future?

With the usage of an investment calculator, one can watch their investment grow over the years. And this can be done by just entering the starting investment balance, additional contribution, period and rate of return. Once you are done furnishing all the details the investment calculator will indicate how much of your investment is predicted to grow in future.

What does the pie chart say about your investment growth?

The pie chart gives you the other stance to look at your investment growth. You can consider your starting balance, the growth in the balance over time, and tally contributions with your changing investment method.

With what type of investment options does the investment calculator work?

The investment calculator works with all investment options. These include stocks, bonds, mutual funds, saving accounts and retirement funds.

Can an investment calculator tell you where to invest?

As there are so many investment plans available it can be difficult to figure out the right one for you. It can help you to predict the returns that each investment option provides. The best among numerous options could be the one that goes with your risk appetite. Plus it should be the kind that you can afford and the one that generates higher returns.

What could be a reasonable rate of return?

As it is quite evident that different investments yield different returns. Generally, risky investments tend to offer amazing returns. Moreover, you can comprehend if the expected returns will be regular or not by looking at documented norms.

Investing monthly or annually which one is better?

Investment can be made weekly, monthly or quarterly. But the concept of Lump-sum investing can be a great strategy to grow your money.

Does investing involve risk?

When an individual gets closer to retirement their investment portfolio becomes more liable to fluctuations in the market. Therefore the experts advise such investors to reduce their risk by investing in a combination of stocks, bonds etc. Also as mentioned above the greater the returns the higher will be the risk related to that plan. Moreover contacting a local financial advisor or broker for help in certain stocks or funds can be a good choice.

What are the best investment options for an average person in India?

There are various investment options in India that you can choose to build your portfolio. But the most important thing is to have financial goals associated with your investment decisions. A diversified portfolio of long-term and short-term investments can be profitable.

How can one select the best investment options?

Before starting your investment journey you should identify your goals; i.e.whether you prefer long-term or short-term investment alternatives. Then contemplate the level of risk that you can take with the amount you have.

Is it risky to invest in stocks?

Stocks are high-risk-return investment options. This means that you get higher returns for the calculated risks that you take while investing. It will move through its ups and downs because it is the fundamental characteristic of the stock market. But if you are a low-risk stock market investor then you can invest in the top stocks on the stock exchange. Nifty is considered to be a good index.

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