Investment calculator is an online tool which helps a person to estimate the approximate period of his/her investments. An individual can also calculate the amount of savings that can be invested in and for how long it should last using the investment calculator. This tool can help a person find out how to fulfill his/her financial goals. Now a person can easily calculate his/her investment returns through this calculator.
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An investment calculator assists a person in estimating the length of time that his or her investment savings will last. One can also calculate the amount of savings that would be worth investing in and how long it would last. So, whether you are just starting out or have been investing for a while, an investment calculator can help you figure out how to reach your goals.
What Is Investment Calculator ?
Factors Taken in Account By Investment Calculator
There are four factors that play a vital role in deciding the outcome of any financial investment, these factors are:
1. Initial or Starting Amount: This amount, also known as the primary amount, is seen at the time of the investment beginning. In most cases, the beginning or initial amount of investment can be a large sum saved for a property or received as an inheritance, or the buying price of a large quantity of gold.
2.Return on Investment: For investors, the return rate is the most important variable in the investment calculator. It may appear to be a simple percentage from the outside, but it is a tough, cold figure that is used to compare the profitability of various investment options.
3. Investment Length: Another important factor in the investment calculator is the investment length. On the one hand, a longer investment involves greater risks due to the unknown future. More years of investment, on the other hand, increase the compounding of returns, resulting in greater incentives.
4. Conclusion Amount: The desired or necessary amount at the end of the investment lifetime that an investor wants.
5. Additional Contribution: In financial terms, this is also known as annuity payout; although, an investment can be made without this aspect. All other contributions to the principal amount during the lifetime of an investment, on the other hand, may result in a larger final amount and a higher accumulated return.
Types of Investments
The following are examples of investment plans that can be put into an investment calculator to calculate the investment:
1. Fixed Deposit in Bank: A fixed deposit (FD) at a bank is another common investment option for those with a low appetite for risk.
2. Bonds: When it comes to investing, risk is a huge factor, but, with this particular investment, higher risks are paid with higher premiums. When an investor owns a bond, he or she lends a part of the purchase price to the issuer. The money is returned over time at a fixed interest rate by the loan issuer.
3. Fixed Maturity Schemes:Fixed Maturity Schemes are closed-ended debt plans issued by mutual funds. These funds, as their name implies, have a set maturity date.
4. The Public Provident Fund (PPF): The Public Provident Fund is another great investment option. The investor receives tax benefits under Section 80C of the Income Tax Act with this investment type. Furthermore, the interest earned as well as the maturity acquired are tax-free.
5. Shares or Direct Equity: While not a fixed-interest investment, shares or direct equity are one of the most important kinds of investment for both individual investors and institutions. An investor receives a proportion or part of an property of an organization, and the company agrees to share profits with its investors.
6. Debt Mutual Funds: Debt mutual funds are open-ended mutual funds that are thought to be less volatile than equity mutual funds. Furthermore, these funds provide similar results.
7. Equity Oriented Mutual Fund Scheme: As the name implies, they are mutual fund schemes that invest at least 65 percent of their assets in domestic companies.
8. Commodities: Commodities can range from precious metals like silver and gold to everyday commodities like gas and oil. If money has been invested in gold, it can be utilized as gold in the event of various financial instabilities.
9. National Pension Scheme (NPS): Investors who want to secure their post-retirement future can put their money into the National Pension Scheme.
10. Real estate: Another reasonable strategy to invest money is in real estate. People buy houses for a variety of reasons, including self-occupation, rental income, and capital gains. Land can also be purchased and improved to increase its value.
What Is the Goal of Investing?
Investing allows a person to put money that they are not spending in a place where it may work for them. In simpler terms, an investment is the process of putting money aside from one's earnings in order to get money in the future.If a person is a careful investor, he or she should consider fixed-income investments such as fixed deposits. The principal sum invested remains safe, and the investor develops an interest in it.
Therefore, if a person is a risk taker, he or she can invest in equities. Higher returns are obtained through equity investments, but at the expense of increased risk.
Investment Returns and Risks
Risks and returns are the only factors that matter in the investing calculator. The closer an investor gets to retirement, the more insecure he or she becomes. Various financial advisers advise older clients approaching retirement to lower their risk exposure by changing their investments from stocks to bonds.
In general, there is a trade-off between return and risk in investment.Investors with a higher risk awareness also have a higher risk tolerance. Sound and safe investing options almost never surpass inflation. Yet, when looking for the best asset allocation balance for yourself, one must also consider his or her risk tolerance capacity and age.
How Does An Investment Calculator Work?
An online investment calculator can be used to quickly and accurately determine investment returns. There are two possibilities in most investment calculators:
- Calculation of annual investment
- Calculation of monthly investment
The following are the steps to using an investment calculator to calculate investment returns:
Step 1: Fill in the beginning amount that one wants to invest each year.
Step 2: After that, one must put in the rate of return that he or she wants. A careful investor may desire a return of 8% to 9%. An ambitious investor, on the other hand, might get an investment return of 11 to 12 %.
Step 3: The next step is to choose the period in years for which you want to keep your money invested.
Step 4: The final step is to choose any current investments that you have.
Most investment calculators feature these fields, which when filled in, will provide the future value of investment. In most cases, a calculator also displays the entire amount of money invested as well as the total amount by which the money invested has increased.
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FAQ About Investment Calculator
What are the advantages of using an investment calculator?
An investment calculator assists in making an informed decision about which instruments to invest in. It also tells you how the amount of money you invest and the length of time you invest have an impact on the expected returns.