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Consistent investments over a number of years can be an effective strategy to accumulate wealth. Even small additions to your savings add up over time. This calculator demonstrates how to put the SAVE252 strategy to work for you! (There are 252 days that the stock market is open when you take out weekends and holidays.)
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Definitions
- Starting amount
- The starting balance or current amount you have invested or saved.
- Additional contributions
- The amount that you plan on adding to your savings or investment each period. This calculator will contribute this amount to your savings 252 times per year. This calculator assumes that you make your contributions at the beginning of each period.
- Years
- The total number of years you are planning to save or invest.
- Rate of return
- The annual rate of return for this investment or savings account. The actual rate of return is largely dependent on the type of investments you select. The S&P 500 for the ten years ending on December 31st, 2011 had an annual compounded rate of return of 2.92%, including reinvestment of dividends. From January 1970 through the end of 2011, the average annual compounded rate of return for the S&P 500, including reinvestment of dividends, was approximately 10.01% (source: www.standardandpoors.com). Since 1970, the highest 12-month return was 61% (June 1982 through June 1983). The lowest 12-month return was -43% (March 2008 to March 2009). Savings accounts at a bank may pay as little as 0.25% or less but carry significantly lower risk of loss of principal balances.
It is important to remember that these scenarios are hypothetical and that future rates of return can't be predicted with certainty and that investments that pay higher rates of return are generally subject to higher risk and volatility. The actual rate of return on investments can vary widely over time, especially for long-term investments. This includes the potential loss of principal on your investment. It is not possible to invest directly in an index and the compounded rate of return noted above does not reflect sales charges and other fees that funds and/or investment companies may charge.
- Compounding
- Earnings on an investment's earnings, plus previous interest. This calculator assumes that all interest is compounded annually, but you being receiving interest on your contributions immediately.
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