Time is money… You probably heard of compound interest or future value of money. They mean the same thing – money can grow over time due to the interest earned. Here is how you can calculate your future value of your investment:
FV – Future Value
PV – Present Value
i – interest rate (Annual rate of return in % / 100)
n – no. of years
Example:
I invest $5,000 at an annual rate of return of 6% for 7 years.
If you are investing in a periodic manner like Dollar Cost Averaging method, you can calculate the future value of your total investment in this way:
FV – Future Value
PA – Principal Amount (initially)
AC – Annual Contribution
i – interest rate (Annual rate of return in % / 100)
n – no of years
Example:
I am putting in $200/month ($2400/year) to invest in STI ETF. Assuming a conservative annual rate of return of 5% for 20 years.
You can also use moneychimp’s basic invesment calculator.
Below is a snapshot from moneychimp:
You may also like:
- Rule of 72
- Warren Buffett – "Rule No.1: Never lose money. Rule No.2: Never forget rule No.1."
- Why investing in mutual funds or unit trusts may not be a good idea?
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