What This Calculation Models
An investment-growth model estimates a future balance from a starting amount, recurring contributions, an assumed rate of return and a time period. It is a scenario calculation rather than a prediction of market performance.
Future Value With Regular Contributions
For a periodic contribution model, the future value depends on the starting balance plus the accumulated value of each contribution. The exact formula changes with contribution timing and compounding frequency.
For end-of-period contributions under a simple periodic model:
P is the starting amount, C is the contribution per period, r is the periodic return and n is the number of periods.
Worked Example Structure
Suppose you start with $5,000, add $300 each month, assume a constant annual return and invest for five years. Convert the annual assumption to the calculator's periodic rate, match the number of periods to the contribution frequency, and then compare the projected balance with the total amount contributed.
Contribution Timing Matters
Contributions made at the beginning of a period generally have one additional period to grow compared with end-of-period contributions. If the real account credits returns differently, use the account's actual convention.
Separate Contributions From Growth
A useful result should show how much money came from your starting amount and contributions versus modeled growth. This makes it easier to understand whether the outcome is driven mainly by saving more, waiting longer or the assumed return.
Do Not Treat a Constant Return as a Guarantee
Real investments can have negative periods, changing returns, fees, taxes and other effects. A constant-rate model is useful for comparing scenarios but cannot predict actual market results.
Use the Tervilo Investment Calculator
Use the Investment Calculator to model starting balance, contributions, return and time. Compare conservative and optimistic assumptions rather than relying on one output.
Common Mistakes
- Using an annual rate as if it were a monthly rate.
- Using years instead of total contribution periods.
- Forgetting to include regular contributions in the total invested amount.
- Interpreting a modeled return as a guaranteed investment outcome.