Project your potential investment returns over a period of time. See the impact of additional contributions, contribution frequency, years to grow, and different rates of return.
Titan’s investment interest calculator gives anyone the ability to project potential investment returns over a period of time. This calculator also shows the potential growth from making regular additional investments through strategies such as dollar-cost averaging.
Here is how the investment calculator works based on the following inputs:
Initial investment amount: This is the amount of money you might initially invest. There’s no minimum here—you could even enter $0, as long as you plan on making additional contributions in the future.
Additional contributions: This is how much you might add on a consistent basis beyond the initial deposit.
Contribution frequency: This reflects how often you might add money, whether monthly or annually.
Years to grow: This is how long the investment is held. The longer the timespan, the greater the potential returns—but remember: returns are not guaranteed. The future balance feature of the calculator shows the effect of increasing the investment length, with an upward sloping curve indicating estimated future wealth.
If you use multiple online calculators and compare the results, you might notice that Titan’s calculator yields different results than others. That’s because Titan’s calculator is agnostic of the current date—meaning that it doesn’t use the exact number of days for each calendar month. Instead, it assumes that each month is 30.4 days, by dividing 365 days into 12 months.
Estimated rate of return: Rate of return (ROR) is the gain or loss for any investment, in percentage terms, for a given period of time. Titan’s calculator uses the historical average growth rates for U.S. stocks, using benchmark indexes such as the S&P 500 Index, which is about 10%. This rate is not adjusted for inflation.
Individual investors can make a determination about what a “good” rate of return looks like, based on their goals, time horizon, and risk tolerance.
Investors with a low tolerance for risk and price volatility, and who want steady income, tend to hold securities with lower rates of return, such as bonds. On the other hand, those with a greater appetite for risk and volatility—and the potentially higher returns—might keep more money in stocks or stock-focused exchange-traded funds (ETFs).
For those considering investing in stocks, a helpful benchmark is the Standard & Poor’s 500 Index (S&P 500). The average annual return from its inception in 1926 through 2020 has been 10.7% (before adjusting for inflation). But there have been swings in the market that go into that annualized return. For instance, in 2018, the S&P 500 declined 4.4%, but in 2013 and 2019, the index generated returns of more than 30%, which outweighed the lower-performing years.
Knowing that the market has boom years and inevitable slumps, it’s useful to look at the market’s average returns over the longer term.
The 10-year annualized return between 2011 and 2020 was 13.9%.
If we go back further, to 1991, we see that the 30-year annualized return through 2020 was 10.7%.
Go back 50 years to 1971, and the return was 10.8%.
Investment risk is usually defined as the possibility that the return you expected from a stock, bond, property, or other security will be lower than your expectation. When you make an investment, you’re accepting the possibility that you could lose some or even all of it.
Every investment has different risks and returns, and investors must decide for themselves how much risk they’re willing to take on at a given time. Factors like age, income, investment goals (like retirement, buying a house, or putting kids through college), and how liquid an investor needs their money to be will influence risk tolerance. There’s also an element of general comfort with risk and gut feeling.
Understanding the risk-return tradeoff of an investment (or investment type) can help with assessing risk. This is the statistical likelihood of higher returns with higher risk. It’s a see-saw effect, and an investor decides where they’re comfortable balancing their tolerance for risk with a desire for a high return.
Importantly, higher risk doesn’t necessarily mean higher returns, since no investment comes with a guarantee.
Dollar-cost averaging is an investment strategy aimed at producing steady growth in wealth while reducing the risk of mistiming the market’s ups and downs—which can lead to the worst of investment outcomes: buying high and selling low.
In a dollar-cost averaging strategy, an individual invests smaller sums of money over a period of time, rather than a larger sum of money all at once. For example, an investor might buy 20 shares of an S&P 500 index fund each month for one year—rather than buying 240 shares at one time. The idea is to mitigate the effects of the inevitable swings in share prices, letting an investor take advantage of markets’ long-term tendency to rise.
Dollar-cost averaging also can be done on different time intervals, with purchases that can be daily or even annually.
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