Portfolio Growth Calculator: what it does

This calculator estimates how your investment portfolio could grow over time when you combine three forces: (1) your starting balance, (2) ongoing contributions, and (3) compounding returns. It’s built for real-world “investing math,” so you can include a monthly contribution schedule, choose how often returns compound, and optionally account for fees and inflation. The result is a clear forecast of:

• Ending portfolio value after your chosen time horizon
• Total contributions you put in (principal you added)
• Total growth that came from compounding (investment returns)
• CAGR / average annual growth implied by the final value (reference metric)
• Inflation-adjusted ending value (optional) to express “today’s dollars”

Core formula (the math behind portfolio growth)

Portfolio growth is the sum of two components:

1. Growth of your initial balance (a lump sum)
2. Growth of your recurring contributions (an annuity-like stream of deposits)

If we assume a constant rate of return, the classic future value formulas are:

• Lump sum future value: FV = PV × (1 + r)ⁿ
• Recurring contributions (ordinary annuity): FV = PMT × [((1 + r)ⁿ − 1) / r]

Where:

• PV = starting portfolio value (today)
• PMT = contribution per period (monthly by default)
• r = return rate per period (annual return / periods per year)
• n = number of periods (years × periods per year)

In the real world, contributions may occur at the start or end of each period. This calculator lets you choose. It defaults to end-of-period deposits (ordinary annuity), which is common for monthly investing. If you contribute at the beginning of each period, your result is slightly higher because each deposit has one extra period to compound.

How fees and inflation are handled

Two things quietly reduce growth over long time horizons: fees and inflation.

• Annual fee drag (e.g., expense ratio or advisory fee) reduces the effective return. A simple approximation is netReturn ≈ grossReturn − fee. Over decades, even a 1% fee can be huge.
• Inflation reduces purchasing power. To convert a future nominal portfolio value into “today’s dollars,” the calculator uses: Real FV = Nominal FV / (1 + i)^years, where i is annual inflation.

Step-by-step: how the calculator computes your forecast

Instead of relying on a single closed-form formula, this calculator simulates your balance period-by-period:

1. Start with your initial balance.
2. Each period, apply the period return rate (after subtracting fees if entered).
3. Add your contribution for the period (beginning or end, based on your selection).
4. Repeat until the time horizon ends.

This matches how investing feels in practice: the portfolio grows on the current balance, and contributions “stack” on top of it.

Examples (so you can sanity-check your results)

Example 1: basic long-term investing

• Starting balance: $10,000
• Monthly contribution: $300
• Annual return: 8%
• Time horizon: 20 years

Your contributions alone are $300 × 12 × 20 = $72,000. But compounding means the ending value can be far higher. The difference between ending value and (starting + contributions) is the “growth” driven by returns.

Example 2: the invisible cost of fees

• Same as Example 1, but add a 1.0% annual fee

A 1% fee doesn’t feel like much in a single year, but it compounds against you year after year. Over long horizons, fees can reduce the ending value by a surprisingly large amount — which is why low-cost funds are popular for long-term goals.

Example 3: nominal vs real (inflation-adjusted)

• Ending value: $250,000 in 25 years
• Inflation: 3%

Your “real” value is roughly $250,000 / (1.03)²⁵. The number is still meaningful — it’s just in today’s purchasing power. This is useful for retirement planning because your future expenses will likely be higher than today’s.

How to use this calculator for smarter planning

• Stress-test return assumptions: Try 6%, 8%, 10% to see sensitivity.
• Increase contributions first: If your horizon is short, contributions often matter more than return.
• Extend the horizon: Time is a compounding multiplier—often the biggest one.
• Use inflation adjustment: Especially for multi-decade goals, “today’s dollars” is more honest.
• Compare scenarios: Save two runs (e.g., higher contribution vs higher return) and compare.

FAQs

• Is this prediction guaranteed?

  No. This is a mathematical forecast based on constant returns. Real markets fluctuate, and actual outcomes vary.

• Should I use average return or expected return?

  Use a conservative estimate for planning. Many people run multiple scenarios (low, base, high) rather than one number.

• What if I contribute irregularly?

  Use an average monthly contribution as a baseline and rerun the calculator after big changes (new job, bonus, etc.).

• Does compounding frequency matter?

  It matters slightly. Monthly compounding typically yields a bit more than annual compounding at the same stated return, especially with monthly contributions.

• How is “growth” defined here?

  Growth = Ending Value − (Starting Balance + Total Contributions). It represents the portion attributed to returns.

• Does this include taxes?

  No. Taxes depend on account type and location. Use this calculator for a clean baseline, then adjust expectations if needed.