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: Enter the number of years you plan to stay invested. For example, if you're investing for a goal that is six years away, you'd enter 6 in this field.

Estimated rate of return: The calculator uses a 6% average annual investment return — the amount your investment will grow each year — as a default. As a simple example, if you invest $1,000 and earn a 6% return, you'll have about $1,060 after a year. It's OK to go with our default if you're not sure, but you can also enter your expected rate of return based on the investments you've selected. Tip: If you've been investing for a while, pull a statement from your investment account — it should show your investments' average annual return for the time you've owned the account.

Compound frequency: This is how often the money you earn from your investment return is added to your balance. "Compounding" is when you begin earning not just on your initial investment, but also on the money you've earned on that investment. For example, let's say your $1,000 earns $5 the first month you are invested. The next month, your 6% investment return will be on an investment balance of $1,005 instead of $1,000. Each month that continues, and as your balance grows, the investment return grows as well.

Typically returns from investments like stocks or mutual funds are compounded daily; some bank products, like savings accounts, will compound monthly. If you're not sure, you can select monthly or even annually to be conservative.

Amount of recurring investments: If you're planning to invest more money in the future, especially on a regular basis, the calculator can add that in. Enter the amount you plan to invest going forward, and how frequently you'll make those investments — every month (monthly) or every year (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 based factors like what you're invested in and how the overall economy or industry is performing. Even within the same type of investment, your returns will vary. On any given day, many stocks will post positive returns, meaning their value will go up and the investors who own those stocks will find their investment is worth a little bit more than it was yesterday. Other stocks will decline in value on the same day. That's how the market works, and even if your investment has performed well in the past, it may not continue at the same rate. 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 (an 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: 3% to 4%+.

• CDs: 3% to 4%+, depending on term.

Our suggestion: Run the numbers a few different ways, using a few different investment returns. For a conservative estimate of how much your investment will grow, knock the above returns down a couple of points. For an aggressive estimate, you could add a couple of points. The reality will likely fall somewhere in the middle.

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 are riskier — 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 to save for a goal with a firm deadline. 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.

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.

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.

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.

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.

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.

» 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 money across many different investments. 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. What this does is act like a seesaw — ideally, when one of your investments is doing poorly, others are doing well to balance that out.