Investment Growth Calculator

The goal of any investment is to get more cash out than you put in. The profit (or loss) you incur is your "return on investment." Thanks to compounding returns, the longer you leave your money invested, the higher your potential returns could be. Use our basic investment calculator to estimate how your investment could grow over time.

How this investment calculator works

The calculator provides an estimate of how your investment will grow, based on information you supply. Here's what you'll need to input into the calculator:

1. An initial investment amount: How much you plan to invest to start.

2. Any planned regular contributions. If you're going to make additional investments, enter that amount in the contribution amount field, then select whether you'll make that investment monthly or annually.

3. How long your investment will grow: This is how long you plan to leave your money in your investment — your investment's timeline.

4. Your expected rate of return: This will depend on the investment you've selected. As a point of reference, the S&P 500 has a historical average annual total return of about 10%, or roughly 7% after inflation. Jump down to see a table of example returns by investment.

5. How frequently your investment will compound: Some financial products, like savings accounts, will have a specific compounding frequency to input here. Stock market investments technically compound daily. If you're not sure, you can select annually to be conservative.

Investing vs. saving

When you have extra cash, one significant factor in determining what to do with it — and what sort of return you should expect — is your risk tolerance.

Saving typically requires you to take on no risk, but offers low returns. Your money will grow slowly over time, in some cases not outpacing inflation.

With investing, you take on more risk in anticipation of higher returns. Investments exposed to low risk tend to generate low or moderate returns; investments that carry high risk offer the potential for higher rewards.

One way to identify how much risk to take is to focus on the particular financial goal you're working toward. You can think about this as the "job" you've assigned to your money. And, as in life, there are different tools for different jobs.

For short-term goals — such as a pending home or car purchase or setting up an emergency savings account — you generally want to save, not invest. So having money in a safe and easy-to-access place matters most. Savings, money market or certificates of deposit accounts covered by the Federal Deposit Insurance Corp. allow cash to earn interest without exposing it to risk.

For a goal that requires growing your money over the long term — for example, retirement, or college savings for your kids — you may opt to take on more risk to generate higher returns. Investing in the stock market is one of the most common places to do so.

You can use the calculator to play around with how different returns change how much money you might accumulate over various timeframes.

Example investment returns

Whenever we talk about example 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 a general guideline as you use this calculator, and the below table should be considered just that. 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. But we know that many people are using this investment calculator to run hypotheticals. Our suggestion: Run the numbers a few different ways, so you get a conservative and aggressive estimate. For the conservative side, knock the below returns down a couple points. For the aggressive, you could use the below or add a couple points.

Total return vs. price return

Something to consider when calculating some investment returns: Is it the price return or the total return?

Price return is the annualized change in the price of the stock or mutual fund. If you buy it for $50 and the price rises to $75 in one year, that stock price is up 50%. If the following year the price closes at $60, the stock price fell 20% that year. If it closes at $65 the third year, it increased by 8.3%.

Total return factors in regular cash payments, such as dividends, from investments that pay them. Over the past 30 years, the difference between the total return and price return of the S&P 500 has been about two percentage points annually, on average.

Types of investments

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

• Stocks: Shares of ownership in a company. Stocks are also known as equities. Stock markets are where shares of ownership in a company, stocks, are sold.

• Bonds: 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.

• Funds: Pooled investments, or investment "baskets," filled with hundreds or thousands of assets. Index funds and exchange-traded funds offer easy diversification at many price points and are popular among all types of investors. You can purchase funds that invest in stocks, bonds or other assets.

Investing doesn't require regularly trading any of the assets above. While some advanced, active investors participate in a form of speculative investing called day trading, many investors buy and hold assets for the long term and can reap similar or even higher rewards doing so.

Additionally, diversification among assets is key when investing. 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.