Investment growth calculator

Return on investment, often shortened to “ROI”, allows you to measure how much money you can make on a financial investment. This could be a stock, a savings account, an index fund, or money you’ve put into a friend’s business.

You can calculate the return on investment by subtracting the initial amount of money that you invested from the final value of your investment. For example if you started with $100 and ended with $120, subtracting $100 from $120 would leave you with $20. If you then divide this number by the initial investment and multiply that by 100, you’ll know your ROI expressed as a percentage. So $20 divided by $100 is 0.2, and multiplied by 100 gives you 20%. 

While you can use ROI to determine how profitable an investment needs to be, it does not take into account how much time the asset will be held for. Time is a crucial component when measuring ROI, because depending on your time horizon and other financial obligations, your needs may change.

Compound interest is the interest earned on interest. It might sound a bit confusing at first, but an easy way to understand what is happening is to imagine a snowball rolling down a hill. At the top, the snowball is small, but as it rolls down the hill it gathers more snow, and more surface area, and gets bigger and bigger, faster and faster. Let’s explain with some simple examples. 

If you had $1,000 earning 10% interest every year, after one year your $1,000 will now be $1,100. In year two you have to run that calculation based on what you had at the end of year one, so now it’s 10% earned on $1,100, so now you’re left with $1,210. See that extra $10 earned in the second year? That’s compound interest. If you continued compounding that initial $1,000 at 10% for 20 years you’d end up with $7,400.25. 

Things can really snowball fast when compound interest is involved!

Starting amount: this is the amount you’ve saved or invested so far. The total balance of your investment accounts for example. 

Additional contribution each year: this is the annual cash contributions you expect to make in the future. For example, if you budget to contribute $200 a month to your investments, put $2,400 into this field.

Number of years: this is your investing time horizon. For example, if you’re a 32 year old trying to see how much money you’d have when you’re 68, you could put 36 into this field.

Rate of return: this is your expected annual return. For cash savings, it will be the interest rate you’re getting from the bank. For investments, you’ll have to make a guess as nothing is guaranteed.