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Future Value Formula:
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Future Value calculation estimates the value of a current investment at a specified date in the future, accounting for compound interest. It helps investors understand the potential growth of their mutual fund investments over time.
The calculator uses the Future Value formula:
Where:
Explanation: The formula calculates compound interest, where the investment grows exponentially over time as returns are reinvested.
Details: Understanding future value helps investors make informed decisions about mutual fund investments, retirement planning, and long-term financial goals. It provides a realistic projection of investment growth.
Tips: Enter the initial investment amount in USD, expected annual return rate as a percentage, and the investment period in years. All values must be positive numbers.
Q1: What is the difference between simple and compound interest?
A: Simple interest is calculated only on the principal amount, while compound interest is calculated on both the principal and accumulated interest, leading to exponential growth.
Q2: How accurate are these projections?
A: Projections are based on constant returns and don't account for market volatility, fees, or taxes. Actual results may vary.
Q3: What is a realistic annual return rate for mutual funds?
A: Historically, stock mutual funds average 7-10% annually, while bond funds average 3-5%, but past performance doesn't guarantee future results.
Q4: Should I consider inflation in my calculations?
A: Yes, for long-term planning, consider real returns (nominal returns minus inflation) to understand purchasing power.
Q5: Can this calculator be used for regular contributions?
A: This calculator is for lump sum investments only. For regular contributions, use future value of annuity calculations.