The investment calculator is a multifunctional tool that helps you to make the appropriate investment decision **based on the type of investment** you're interested in. For example, you can not only estimate the *final balance* of your investment, but you can also quickly assess what your *initial balance*, *periodic contribution*, or *rate of return* should be to reach your ultimate goal. Besides, you can estimate the *time needed* for a specific investment to achieve a chosen desired balance.

As the tool incorporates multiple features, you can specify your investment to a great degree. For instance, you can set the average inflation rate, which helps you to find the purchasing power of your final balance and indicates if you have gained or lost in reality. The built-in **dynamic graphs**, namely, the *Final Balance Breakdown* and the chart of your *Annual Balances*, give you a better insight into the structure of your investment, and you can easily follow its progress through its lifespan.

## A short survey on investment

In the broadest sense, an investment is an asset or item acquired with the primary goal of generating income. In an economic context, an investment is something that is purchased that is not consumed today but is instead used in the future to create *revenue*. In finance, **investment** means an **acquisition of a financial asset or allocation of money that provides income in the future** or will be sold at a higher price for profit. Any benefit arising from an investment decision is called a *return*. A return can take several forms; for example, it can be a gain (or loss) realized from selling a particular asset or investment income as dividends or interest.

As a general rule, investors expect higher returns from riskier investments. Hence, return and risk are strongly interlinked. If you would like to know more about this relation, you can have a look at the Sharpe ratio, where this topic is explained in more detail. To reduce overall risk, it is often advisable to *diversify* a basket of assets or portfolio. In this respect, you may check the CAPM calculator that helps you to find out the appropriate expected return of an asset or portfolio.

This calculator focuses prominently on financial investment that generates income in the form of annual return or interest. If you are interested in a property investment, you may look at our cap rate calculator, which can help you evaluate a property.

## Specifics of the investment calculator

Before you make any investment, you need to know how different factors affect your revenue. Besides, to be able to employ this tool properly and to understand its computational basis, it is essential to get familiar with its specifications.

**Initial Investment and Desired Balance**These are the

*initial balance*that you start your investment with and the*final balance*that you reach or intend to obtain. In financial terms, they are the present value and the future value, which are linked together by the time value of money, which is one of the most fundamental concepts in finance. To learn more about how the present and future values in an investment are related, check out the IRR calculator.**Rate of Return**This is one of the most relevant factors in your investment. It generally refers to the change in the value of the investment or its cash flow, such as interest payments or dividends. In this calculator, it is prominently associated with the annual interest rate or, more precisely, the percentage rate of the invested amount for a year. If you would like to estimate the return over the full term of an investment, you may check the ROI calculator, which gives you more insight into the profitability of an investment. ROI tells you how efficient your investment is or allows you to compare the performance of a couple of different investment options. This calculation is done by checking how much return you will get on your investment, taking into account the costs.

**Term**This is the time frame that you intend to resign from the usage of the money to gain profit.

**Compound Frequency**See AlsoInvestment Return Calculator - Growth on Stocks, Index & Mutual FundsInvestment CalculatorInvestment CalculatorHow to Calculate Return on Investment (ROI)Compound interest is one of the most powerful concepts in finance, and most financial/investment products are based on this. Compound interest might be defined as an income that is earned not solely on the initial amount invested but also on the balance augmented by the previously earned interest. It is easy to see that the more often compounding occurs, the higher the interest accrued. Eventually, this can have a significant effect on the final balance, especially in the long term. The most simple compounding frequency is yearly, which means that interest is calculated on your balance annually. In the real world, however, compounding happens more often, for example, semi-annually or monthly, depending on the type of financial instrument. Compounding may occur even more frequently. In theory, it can reach its highest frequency, called

**continuous compounding**, which is the theoretical limit of the process. For more insight into this mechanism, you can learn interesting things in the*Natural logarithm*section of the log calculator.**Annual Inflation Rate**Since inflation can substantially change the buying power of an amount of money, it is essential to take into account its dimension. When the inflation rate is high, the real inflation-adjusted return, or real interest rate, on your investment is lower, which may not even compensate for the purchasing power loss caused by hikes in the general price level. In such a case, although in the nominal term you made a profit, in the real term, you lost on the investment.

**Additional Contributions**In this section, you may set a specific amount that you intend to add to your investment during its term. Besides

*its amount*(**How much?**), you can specify its*regularity*(**How often?**) and its*timing*(**When?**), which can be the beginning or the end of the period. Also, you can set the contribution's*annual growth rate*or*periodic growth rate*. The option to set a growth rate for the additional deposit allows you to follow an expected increase in the money devoted to your investment or to compensate for the purchasing power loss resulting from inflation.

Oh, by the way, if you are interested in making extra money in the stock market, you should consider derivatives as a high-risk/high-reward instrument. If you are more into limited risk but also the extra income, we recommend you check our options spread calculator.

## How to use the investment calculator?

As now you are familiar with the main components of this device, you can learn how to apply it to different issues.

Begin by choosing the subject you are interested in, which can be the following:

**Final Balance**This feature gives you an answer to probably the most basic question: What will be the final balance of my investment?

**Initial Investment**If you choose this option, you can estimate how much money you need to invest at the beginning of the term to reach a specific goal.

**Periodic Contribution**With this function, you can quickly compute what money you should allocate in every specific period to get the desired final balance.

**Time Length**The purpose of this option is to get an answer to a slightly trickier question: How long should I wait to reach a specific goal?

**Rate of Return**Finally, this function is designed to estimate the annual rate of return that is necessary for realizing a desired balance.

After specifying the question, you can analyze the output in multiple ways. You can find the results in three sections:

In the

*Results*section, you can read all the relevant information about your final balance and its compositions. Also, you can learn the effect of inflation if you decide to include that aspect.Under the

*Final Balance Breakdown in Percentage*, you can learn how the final balance is built up and how its components relate to each other.The

*Annual Balances*section allows you to choose from various representations according to your preference, where you can follow the progression of your investment year by year. The three options are a*line chart*, a*bar diagram*, and a*table*.

## How to estimate the future value of your investment?

To help explain the previously outlined features, we will now go through a simple example for the most basic function of the tool: What will be the future value of my investment?

**Main Features**

To find the

*future value*, you need to choose what*you would like to know*, which is the "Final balance" in this case.Determine how much you are willing to

*invest initially*. Note that you can set the initial investment to zero as well; however, in such a case, you need to set an*additional contribution*to your investment.Set the

*rate of return*.Determine the

*duration*of your investment.Choose the

*compounding frequency*.Decide if you'd like to include the

*inflation rate*.

**Additional Contributions**

If you would like to allocate additional money with a specific regularity, first choose

*how often*you would like to do it. Note that your initial investment, thus your principal, will augment by this amount until the end of the term.Set

*how much*money you would like to add to your investment.Specify

*when*you would like to settle the contribution to the periods.Decide if you would like to set any

*growth rate*to the sequence of the contributions.

**Results**

Read the output information and review the charts for more details.

## Interest on investment formula

If you want to know how to calculate the final balance of your investment over a period of time, the equation is the same for any asset:

$\tiny\begin{gather*}\mathrm{final}\\[-0.25em]\mathrm{balance}\end{gather*} = \tiny\begin{gather*}\mathrm{initial}\\[-0.25em]\mathrm{amount}\end{gather*} \bigg( 1\!+\!\frac{\begin{gather*}\mathrm{interest}\\[-0.25em]\mathrm{rate}\end{gather*} }{\begin{gather*}\mathrm{compound}\\[-0.25em]\mathrm{frequency}\end{gather*} }\bigg)^{\tiny\begin{gather*}\mathrm{compound}\\[-0.25em]\mathrm{frequency}\end{gather*}\times \tiny\mathrm{years}}$finalbalance=initialamount(1+compoundfrequencyinterestrate)compoundfrequency×years

The time period will usually be one year, as interest rates are often calculated annually. There are also other equations used to estimate various investments. Their complexity depends on how many variables you want to take into consideration (effects of inflation, changing interest rates, etc.). If you need more information, you can check out the compound interest calculator, where you can find not only the formulas for periodic compounding and continuous compounding but also for interest calculations on mortgage rates, etc.

## FAQ

### How do I estimate the future value of my investment?

To estimate the future value of your investment, you need to know:

- The amount you are willing to
**invest initially**. - The
**rate of return**of your investment. - The
**duration**of your investment. - The
**compounding frequency**(i.e., yearly, monthly, weekly). - The
**inflation rate**, if you want to know the amount earned in an inflation-adjusted term.

Once you have this information, you can use it in the equation:

`Final balance = Initial amount × [(1 + (Interest rate / Compound frequency)]^(Compound frequency × years)`

### What is considered a good investment for beginners?

If you are starting out investing your money, you should not invest in higher-risk investments but **prioritize low-risk investments**. Good investments for beginners could be:

- Fixed deposits;
- Stocks (indexes and large market cap);
- Bonds;
- Mutual funds; and
- Property investment.

### How do I start investing my money?

To start investing your money, you need to:

**Decide**how much you want to invest.**Establish**for how long you want to invest — short-term or long-term?**Determine**if you will need assistance with your investments or if you will do it on your own.**Check**the type of investment is the best option for you.**Start**investing!

### What is my final balance in 3 years if I invest $10,000?

If you consider a rate of return of **10%** and your interest is compounded **yearly**, you will have **US$ 13,310** in 3 years. You could also consider the inflation rate and additional contributions you intend to add to your investment during its term. You can check the answer with Omni's investment calculator.

### Is $1,000 a good amount to invest?

**Yes and no**. If you are planning to invest this amount regularly as an additional contribution to your investment, you can save a lot of money in the **long term**. But if you plan to invest $1,000 as an initial value and don't add additional contributions during your investment, it may take a lot of years to have a good return.