Monthly Investment Calculator

Monthly Investment Formula:

\[ A = PMT \times \frac{(1 + r)^m - 1}{r} \]

Future Value (A):

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1. What is the Monthly Investment Formula?

The monthly investment formula calculates the future value of a series of regular investments (annuity) earning compound interest. It shows how regular contributions can grow over time through the power of compounding.

2. How Does the Calculator Work?

The calculator uses the monthly investment formula:

\[ A = PMT \times \frac{(1 + r)^m - 1}{r} \]

Where:

\( A \) — Future value of investment (currency units)
\( PMT \) — Regular periodic investment amount (currency units)
\( r \) — Periodic interest rate (decimal)
\( m \) — Number of investment periods (unitless)

Explanation: The formula calculates how much your regular investments will be worth in the future, accounting for compound interest earned on all contributions.

3. Importance of Regular Investing

Details: Regular investing through dollar-cost averaging helps build wealth over time, reduces market timing risk, and takes advantage of compounding returns.

4. Using the Calculator

Tips: Enter your monthly investment amount, annual interest rate (as a percentage), and the number of months you plan to invest. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between this and compound interest?
A: This formula calculates future value with regular contributions, while basic compound interest calculates growth of a single lump sum investment.

Q2: How often is interest compounded in this calculation?
A: The formula assumes monthly compounding to match the monthly investment frequency, providing the most accurate results.

Q3: Can I use this for different investment frequencies?
A: Yes, but you must adjust the interest rate and number of periods accordingly (e.g., for quarterly investments, use quarterly rate and quarters).

Q4: Does this account for taxes or fees?
A: No, this is a simplified mathematical model that doesn't account for taxes, investment fees, or inflation.

Q5: What if I want to calculate the required monthly investment?
A: You would need to rearrange the formula to solve for PMT instead of A, given your target future value.