September 17, 2021

Using an Investment Calculator

An investment calculator is a financial tool that many people use in order to determine the feasibility of an investment idea. By inputting various pieces of information, such as a starting point and end point values, as well as other helpful parameters, such as a percentage change in the value of an initial investment, an investment calculator can produce an approximate value for the potential gains associated with the investment idea. Using the investment calculator, a person can then work out the exact amount of money they would need in order to achieve their goal and how much time it would take based on the inputs provided.

The Investment Calculator is essentially used to calculate an arbitrary parameter for an investment scheme. The first tabulated values represent the initial investment needed to find the desired result with particular inputs. For instance, to calculate the exact rate at which a particular asset’s value will move towards a goal with certain inputs, select the ‘Cumulative Return’ tab on investment calculators.

Once the starting balance and the total number of investments are input, the next tabulated values are the corresponding current values and their effect on the cumulative return. When these two tabs match up, the calculator can now provide an estimate of the expected results based on the initial starting balance and the accumulated investments. In order to get a good idea of the impact of one change in one variable, the investment calculator will allow a ‘cumulative growth’ tab that allows the investor to compare the impact of moderate growth versus significant growth. Finally, the investment calculator will need to have some standard choices automatically selected by the user in order to produce an accurate value for the starting balance, end balance, and cumulative growth.

One other type of investment calculator that can simplify the complex calculation involved with investments is the index mutual funds calculator. This calculator is very similar to the stock index calculator found in financial spreadsheets. It requires only stocks that are part of a large index. Instead of stock prices, the index stocks are the blue chips used in the calculation. This type of calculator will require the addition of fund costs as well as dividends to the balance to obtain the expected returns on the initial investment.

An investment calculator that can help with your investments is the Roth IRA calculator. This calculator is very similar to the traditional Roth IRA calculator, except that it also includes additional contributions to the account for after tax income. The Roth IRA allows investors to invest after tax money into the account in a tax-deferred way, avoiding the higher taxation of the traditional method of investment during retirement. The calculator uses both the present day value of the contribution and the current date for the start of the retirement plan. These contributions are not taxed either.

Most of the investment calculators are based on the assumption that total contributions will be made at the start of every year. In order to determine the amount of investment you will be able to make at a certain rate, the investment calculator will need to know your marginal tax rate. The marginal tax rate is the amount of income that you are allowed to deduct each year as a form of tax write off. The calculator can determine your marginal tax rate by adding up your estimated total contributions over your lifetime and dividing it by the total number of years you are expected to live. Once you have determined your expected lifetime income, you can plug this amount into the investment calculator to get your investment return.