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Investment Calculator
An investment calculator is an online calculation tool that helps you estimate the future value of your investments. This calculator is essential for planning financial goals, understanding the impact of compound interest, and making informed investment decisions.
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What is an Investment Calculator?
An investment calculator is a tool that helps you estimate how much your money can grow over time. You can see potential returns by inputting details like the initial amount, interest rate, and investment duration. It is the best way to plan for your financial future and make informed decisions about where to invest.
How Does An Investment Calculator Work?
The workings of an investment estimator are very simple and easy. You tell the calculator how much you are investing, how often you will add more amount, for how long, and what return you expect. Let us understand these stages for working on an investment return calculator below:
Stage 1- Insert Values:
You will provide details like: Initial Investment, Planned Regular Contributions (optional), Investment Period, and Expected Rate of Return (estimated).
Stage 2- Calculation Formula:
The investment calculator initially uses a compound interest formula to project future Return on Investment (ROI):
A = P (1+r/n)^nt
Where:
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A = Amount of money accumulated after n years, including interest.
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P = Principal amount (initial investment).
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R = Annual interest rate (decimal).
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N = Number of times that interest is compounded per year.
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T = time the money is invested for in years.
KEYNOTE: Compound interest considers both the initial investment and the interest earned on previous interest payments.
Stage 3- Output:
The compound interest calculator in India provides an estimate of the following:
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Future Value: The total amount you will have at the end of your investment period.
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Other Crucial Details: An investment calculator in India can also help you with the required return rate to reach a specific future financial goal.
Parameters Involved in an Investment Calculator
The key elements involved in an investment calculator are listed below:
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Initial Investment (Principal): The amount of money that you initially invest.
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Regular Contributions: Any additional amount you plan to invest periodically, like monthly deposits.
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Investment Period: The length of time you plan to hold the investment, typically measured in years.
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Expected Rate of Return: The annual percentage rate at which your investment grows. This can be an expected or historical rate of return.
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Compounding Frequency: How often the interest is applied to the investment (e.g., annually, semi-annually, quarterly, monthly, daily).
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Future Value: The amount of money that the investment will be worth after the specified period, given the rate of return and compounding frequency.
Power of Compounding Principle
The power of compounding is often called "interest on interest." It is a financial principle that shows how a small investment can grow into a large amount of money over time if the interest earned is reinvested instead of being withdrawn.
Illustration of the Power of Compounding
This concept describes compound interest, where you earn interest not only on the initial amount but also on the interest from previous periods.
Let us illustrate this with a simple example. Assume you invest ₹10,000 at an annual interest rate of 8%. Below is a table showing the value of the investment over different periods:
| Year | Principal (₹) | Interest Rate (%) | Interest Earned (₹) | Total value (₹) |
| 1 | 10,000 | 8 | 800 | 10,800 |
| 2 | 10,800 | 8 | 864 | 11,664 |
| 3 | 11,664 | 8 | 933 | 12,597 |
| 5 | 13,499 | 8 | 1,080 | 14,579 |
| 10 | 18,627 | 8 | 1,490 | 20,117 |
| 20 | 43,219 | 8 | 3,458 | 46,677 |
| 30 | 100,627 | 8 | 8,050 | 108,677 |
HIGHLIGHT: As seen in the table, the total value of the investment grows significantly over time. By the end of 30 years, the initial ₹10,000 investment grows to ₹108,677, showcasing the exponential growth due to compounding.
Different Types of Investment Calculators in India
There are different types of investment calculators available online, each suited for a specific purpose. The major types of calculators are:
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One-time/ Lumpsum Calculator
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Monthly Investment Calculator.
The following cards will help you to simplify the two types of return on investment calculators available in India and offer a brief explanation of their utility:
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One-time or Lumpsum Investment Calculator:
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Definition: Helps you calculate the future value of a single, one-time investment.
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Estimates: Future value of the investment based on factors like interest rate and period of investment.
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Benefits: Useful for understanding the growth potential of lump sum investments, aiding in financial planning for major expenses like buying a house or funding education.
Total Lumpsum Invested Amount Investment Period Estimated Returns on Investment Maturity Amount* ₹ 1 lakh 20 Years 15% ₹ 16.37 Lakhs ₹ 1 lakh 20 Years 20% ₹ 38.34 Lakhs ₹ 1 lakh 20 Years 25% ₹ 86.74 Lakhs ₹ 1 lakh 20 Years 30% ₹ 1.90 Cr -
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Monthly Investment Calculator:
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Definition: Helps you calculate the future value of regular monthly investments.
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Estimates: Future wealth accumulation through systematic monthly contributions.
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Benefits: Assists in planning and optimizing investments for long-term goals by determining the potential growth of regular savings over time.
Regular Invested Amount Investment Duration Period of Regular Investments Estimated Returns on Investment Total Maturity Amount ₹ 10K/Month 10 Years 10 Years 15% ₹ 12 Lakhs ₹ 10K/Month 10 Years 10 Years 20% ₹ 12 Lakhs ₹ 10K/Month 10 Years 10 Years 25% ₹ 12 Lakhs ₹ 10K/Month 10 Years 10 Years 30% ₹ 12 Lakhs -
Investment Calculators for Different Investment Options
Some of the common types of annual investment calculators for various best investment options are listed below:
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SIP Calculator
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Definition: It helps you plan how much money you can save over time by investing regularly through a Systematic Investment Plan (SIP).
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Estimates: Future wealth accumulation through regular investments.
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Benefits: Helps plan and optimize investments for long-term goals like buying a house or retiring comfortably.
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Pension Calculator
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Definition: It helps you figure out how much money you might have when you retire.
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Estimates: Retirement income based on your contributions and returns.
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Benefits: Assists in planning and ensuring financial security after retirement.
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Annuity Calculator
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Definition: Helps you calculate regular payments from a lump sum of money, like an investment or insurance product.
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Estimates: Periodic payments you will receive from your investment or insurance.
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Benefits: Useful for planning steady income streams during retirement or other stages of life.
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ULIP Calculator
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Definition: Helps you calculate the potential returns and value of your investment in a Unit Linked Insurance Plan (ULIP).
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Estimates: The future value of your ULIP based on premiums paid, expected rate of return, and fund performance.
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Benefits: Assists in investment growth understanding, long-term financial planning, and selecting the right ULIP.
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NPS Calculator
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Definition: Helps you plan for retirement through a government-sponsored pension scheme.
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Estimates: Retirement corpus and pension based on contributions.
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Benefits: Offers a structured way to save for retirement with tax benefits.
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FD Calculator
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Definition: Helps you calculate how much money you'll get from a Fixed Deposit.
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Estimates: Maturity amount and interest earned.
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Benefits: Useful for comparing FDs from different banks for better returns.
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RD Calculator
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Definition: It helps you figure out how much money you'll have after saving regularly.
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Estimates: Maturity value of your recurring deposits.
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Benefits: Helps in planning regular savings towards specific goals.
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PPF Calculator
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Definition: Helps you calculate how much your investment in a Public Provident Fund will grow.
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Estimates: Maturity amount and interest earned.
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Benefits: Offers tax benefits and guaranteed returns.
EPF Calculator:
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Definition: Helps you understand your retirement savings under the Employees' Provident Fund scheme.
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Estimates: Retirement corpus and monthly pension.
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Benefits: Ensures financial security after retirement for employees.
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SSY Calculator
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Definition: Helps you plan for a girl child's future education and marriage expenses.
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Estimates: Maturity amount and returns on investments in the Sukanya Samriddhi Yojana.
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Benefits: Helps in financial planning for a girl child's future needs.
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Income Tax Calculator
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Definition: Helps you estimate how much income tax you owe or how much tax refund you might receive.
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Estimates: Income tax liability or refund based on your income, deductions, and tax credits.
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Benefits: Helps in tax planning by providing insights into your tax liabilities, optimizing deductions, and ensuring compliance with tax laws.
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Why is it Important to Invest?
Learn the importance of investing in the best investment plans from the following points:
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Wealth Growth: Investment plans help you grow your wealth effectively.
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Financial Security: High-return investments provide a secure financial base, minimizing risks.
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Goal Achievement: Strategic investments align with financial goals, facilitating milestones.
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Beat inflation: Long-term investment plans help you outpace inflation, preserving and enhancing your purchasing power. You can use a 5-year investment plan calculator to estimate the return on investment with these plans.
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Tax Benefits: The tax-saving investments offer tax benefits, optimizing savings and returns.
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Peace of Mind: Reliable investments bring reassurance, freeing you from financial anxieties.
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Capital Appreciation: Your capital steadily grows with the right investment choices.
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Retirement Planning: Wise investments ensure a comfortable retirement, securing your future.
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Compounding Returns: Reinvesting your earnings brings exponential growth of your investments over time.
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Diversification: A diversified portfolio of your investment plans will help you to spread the investment risk for financial stability.
Benefits of Investment Calculator
Investment calculators are helpful for:
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Estimating Growth: Calculating how much an investment will grow over a specified period.
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Comparing Scenarios: Assessing different investment strategies, such as varying the contribution amount or rate of return.
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Understanding Compounding: Illustrating how compound interest affects the value of an investment over time.
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Planning for the Future: Determining how much you need to invest to reach a financial goal, like retirement or education costs.
In Conclusion
An investment calculator is a valuable tool to estimate the potential growth of your investments over a period. By entering key information like initial investment, expected return rate, and investment duration, you can gain insights into how your money could grow. It helps you make informed decisions about your financial goals, allowing you to compare different investment scenarios and choose the best strategy to maximize your returns.
†Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. The sorting is based on past 10 years’ fund performance (Fund Data Source: Value Research). For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in
Past 10 Years' annualised returns as on 01-12-2024
^The tax benefits under Section 80C allow a deduction of up to ₹1.5 lakhs from the taxable income per year and 10(10D) tax benefits are for investments made up to ₹2.5 Lakhs/ year for policies bought after 1 Feb 2021. Tax benefits and savings are subject to changes in tax laws.
*All savings are provided by the insurer as per the IRDAI approved insurance plan.
Tax benefit is subject to changes in tax laws. Standard T&C Apply
~Source - Google Review Rating available on:- http://bit.ly/3J20bXZ
^^The information relating to mutual funds presented in this article is for educational purpose only and is not meant for sale. Investment is subject to market risks and the risk is borne by the investor. Please consult your financial advisor before planning your investments.
#The investment risk in the portfolio is borne by the policyholder. Life insurance is available in this product. The maturity amount of Rs 1 Cr. is for a 30 year old healthy individual investing Rs 10,000/- per month for 30 years, with assumed rates of returns @ 8% p.a. that is not guaranteed and is not the upper or lower limits as the value of your policy depends on a number of factors including future investment performance. In Unit Linked Insurance Plans, the investment risk in the investment portfolio is borne by the policyholder and the returns are not guaranteed. Maturity Value: ₹1,05,02,174 @ CARG 8%; ₹50,45,591 @ CAGR 4%
¶Long-term capital gains (LTCG) tax (12.5%) is exempted on annual premiums up to 2.5 lacs.
**Returns are based on past 10 years’ fund performance data (Fund Data Source: Value Research).
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