📖 The story
Kevin puts $250 per month into a global equity fund for 20 years and expects 9 % return per year.
ℹ Ordinary payment, 12 installments per year.
Topics › Mutual Funds & Securities › Long-term fund savings plan
Easy
Mutual Funds & Securities
Long-term fund savings plan
Change any number and press "Calculate" – or use "Type in" on the right to watch it entered step by step.
What if …
Years × Annual return›
What you learn
Over two decades the gain in value exceeds the total of the deposits several times over – compound interest grows more powerful with every year.
In short: Over two decades the gain in value exceeds the total of the deposits several times over.
Continue with this result
What is this final value worth in today's purchasing power? · Purchasing power of a saved amount in the future
What monthly pension does this capital support? · What pension can the savings support?
Formula
FV = K0·q^n + R·(q^n − 1)/(q − 1), q = (1+i_eff)^(1/m)
With the example numbers
q = (1+0.0900)1/12 = 1.007207, n = 20·12 = 240
FV = 250.00 $·(qn−1)/(q−1) = 159,712.93 $
FV = 250.00 $·(qn−1)/(q−1) = 159,712.93 $
How to read the formula
Every installment earns interest until the end – early installments longer, late ones shorter. The bracket (qⁿ−1)/(q−1) sums up all these differently compounded contributions at once. q is the growth factor per period: from the effective rate p.a. the matching monthly factor is derived via the ¹ᐟᵐ root. Takeaway: it is not the sum of the deposits that counts, but how long each dollar is allowed to work.
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