Investment Return Calculator

How to use this investment growth calculator

Here's what you'll need to enter to get started:

Initial investment: Enter how much you plan to invest to start.

Years of investment growth: This field captures how long you plan to leave your money in your investment — your investment's timeline.

Estimated rate of return: The calculator uses 6% as a default, but this field is modifiable since your estimated rate of return will depend on your investment strategy. As a point of reference, the S&P 500 has a historical average annual total return of about 10%, or roughly 7% after inflation. You could also look at your investment account statements for the historical average annual return of your own investments or investment account.

Compound frequency: Some financial products, like savings accounts, will have a specific compounding frequency to input here. If your expected return is annual — for example, in step 3, you assumed a 7% annual return — you'll want to set the compounding frequency to annually as well. If you're not sure, you can select annually to be conservative.

Amount of recurring investments: If you're going to make additional investments, enter that amount in the amount of recurring investments field, then select whether you'll make that investment monthly or annually.

What's considered a "good" investment return?

Whenever we talk about "good" or typical investment returns, we need a big blinking disclaimer: They vary widely — in some cases, by the hour — and shouldn't be considered a guarantee in any shape or form. There's a reason the phrase "past performance does not guarantee future results" is used so frequently.

That said, it helps to have some general guidelines as you use this calculator:

• S&P 500 (index of U.S. large-cap stocks): 10% long-term historical average annual return.

• Bond mutual or index funds: 3% to 4% for U.S. government bonds; more for riskier bonds.

• High-yield savings accounts: 4% to 5%.

• CDs: 3% to 4%, depending on term.

In an ideal world, you'd run your calculations by plugging in your own expected investment return, based on the specific investments you've chosen. However, we know that many people are using this investment calculator to run hypothetical scenarios.

Our suggestion: Run the numbers a few different ways to get both a conservative and an aggressive estimate. For the conservative side, knock the above returns down a couple of points. For the aggressive, you could add a couple of points.

Types of investments

Investments are often categorized into asset classes. Common asset classes include stocks, bonds, cash, commodities and real estate.

Bonds

Bonds are loans made from an investor to corporations or governments. The investor receives interest while the corporation or government uses the loan to fund its operations. Generally speaking, bonds that carry more risk — for example, from corporations rather than the U.S. government — will pay higher returns.

CDs

CDs, sometimes called certificates of deposit, are fixed-income investments typically used for defined-term goals. For example, if you know you need to buy a car next summer, you might put your savings into a 6-month CD where you'll earn a set rate of return. The downside is that unlike the above investments, CDs generally charge a penalty if you need to take money out before the end of the term.

Commodities

Commodity investments are investments in raw goods, such as energy, metal or agricultural products. Examples of commodities include oil, gold, wheat and livestock. Investors who invest in commodities tend to do so through commodity funds (such as oil ETFs) or through futures trading.

Exchange-traded funds

Exchange-traded funds are similar to index funds and mutual funds, but they trade on a stock exchange, which means they can be bought and sold throughout the day. They are often more tax-efficient than mutual funds.

Mutual funds and index funds

Mutual funds are pooled investments, or investment "baskets," filled with many different assets. Mutual funds allow investors to purchase different securities within a single investment. They are often managed by professional fund managers who aim to beat the market (though analysis shows they often don't). You can purchase funds that invest in stocks, bonds or other assets. Index funds are a type of mutual fund that tracks a stock market index rather than employing a professional investor. They often charge lower fees as a result.

Real estate

Real estate investing doesn't just mean investing in physical properties, though that's one way to do it. Many investors invest in real estate through REITs, or real estate investment trusts. These are companies that own a portfolio of real estate, often commercial properties or apartment buildings.

Stocks

Stocks are shares of ownership in a company. Stocks are also known as equities. Investors typically expect stocks to earn a high rate of return over time, though they can be volatile in the short term.

» Dive deeper: View the best investments right now

How do you minimize risk while still earning a return?

By definition, investing comes with some risk. However, one of the best ways to minimize that investment risk is to ensure your portfolio is diversified.

Diversification is a financial strategy that spreads your investments across assets to reduce risk and exposure to market volatility. That means holding a portfolio that includes different types of investments, and different investments within the categories outlined above.

For example, for optimal diversification, you wouldn't just invest in one stock — you'd build a portfolio of stocks from different industries and regions, and you'd allocate some of your portfolio to other investments, such as bonds.