Required return for your goal
Before choosing where to invest, it helps to know what return you need. If it comes out very high, it may be better to extend the time frame or contribute more than to take on more risk.
What return you need to reach your goal
Enter what you have, what you will contribute each month, the amount you want to reach and the time frame. The calculator tells you the annual return your investment needs, how much you put in and how much has to come from returns.
Example: to go from 10,000 to 100,000 in 15 years contributing 300 a month, you need a 4.97% annual return. You put in 64,000 and the other 36,000 has to come from the investment. With no return, you would need to contribute 500 a month.
How it is calculated
- Final value = starting amount and monthly contributions compounded each month at (1 + annual)^(1/12) − 1.
- The required return is the annual rate that makes the final value equal to the goal (found by successive approximation).
Assumptions
- Equal contributions at the end of each month.
- Constant return, after fees and before taxes.
- Higher returns usually mean more risk: no return is guaranteed.
Frequently asked questions
How is the required return calculated?
It finds the annual return at which your starting amount and monthly contributions, compounded monthly, reach the goal exactly in the time frame you set.
What if the required return is very high?
A higher return usually means more risk. Before chasing it, try a longer time frame or larger contributions: in the example, 20 years instead of 15 would need only 1.74% a year; contributing 400 a month for 15 years, 2.32%.
What if it comes out negative?
It means your contributions alone already exceed the goal with no return at all. Even so, it is worth making sure inflation does not eat into the money.
Is it the return before or after fees?
After fees: it is what your money really has to grow by. If your investment charges 1% a year, it has to earn that 1% on top.
Does it account for inflation?
No. If your goal is to buy something many years from now, raise the goal by the inflation you expect or use a real return.