Project investment growth from an initial balance, monthly contributions and return.
UNDERSTAND THE ANSWER
How is this calculated?
The projection compounds a constant net annual return monthly and adds equal contributions at the end of each month. Net return is expected return minus annual fee.
Future value with contributionsFV = Initial growth + Future value of monthly contributions
A practical example
$10,000 invested with $500 monthly contributions for 20 years at a 7% return can grow to more than $270,000 before taxes.
Assumptions, interpretation and common mistakes
Calculation assumptions
Return and fees remain constant and compound monthly.
Contributions occur at the end of each month.
Taxes, inflation, volatility and contribution increases are excluded.
How to interpret the result
Projected value is a scenario, not a guaranteed future balance.
Contributions show the cash supplied by the investor.
Estimated gain or loss is the difference between projected value and contributions.
Common mistakes to avoid
Using an optimistic return as if it were guaranteed.
Ignoring fees, taxes and inflation when comparing outcomes.
Comparing investments with different risk using return alone.