Compound Growth with Dollar-Cost Averaging
Models both initial lump-sum capital and automated monthly contributions, showing how regular deposits accelerate the compounding curve.
Investment Return Calculator
Free investment return (ROI) calculator to evaluate total profit, ROI percentage, and compound annualized returns (CAGR) for investments and assets.
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Future Investment Value & CAGR Formulas
Last reviewed: September 2026Calculation Formula
FV = PV × (1 + r/n)^(n×t) + PMT × [((1 + r/n)^(n×t) - 1) ÷ (r/n)]
CAGR = (Ending Value ÷ Beginning Value)^(1/t) - 1
Variables & Definitions
- FV:
- Future portfolio balance at end of horizon
- PV:
- Present value / initial principal invested
- PMT:
- Periodic contribution made each period
- r:
- Annual expected rate of return (as decimal)
- n:
- Compounding frequency per year (12 for monthly, 1 for annual)
- t:
- Total investment duration in years
- CAGR:
- Compound Annual Growth Rate
Core Assumptions
- Constant average annual rate of return across the full investment duration.
- Periodic contributions are deposited consistently at the end of each period.
- All dividends, distributions, and interest are 100% reinvested.
- Calculations exclude asset management fees (expense ratios) and trading commissions.
Disclaimer: Calculations are theoretical illustrations for financial planning and education. Financial markets fluctuate, and historical asset returns (such as S&P 500 averages) do not guarantee future performance. Does not account for federal or state capital gains taxation. Consult a registered investment advisor (RIA).
Worked Example: $10,000 Initial Principal with $500/Month at 8% over 20 Years
An investor starts an index fund portfolio with $10,000 and automates a $500 monthly contribution for 20 years, assuming a historical 8% average annual market return compounded monthly:
| Initial Starting Capital | $10,000.00 |
| Total Cumulative Contributions ($500 × 240 mos) | $120,000.00 |
| Total Out-of-Pocket Invested | $130,000.00 |
| Compound Growth Earned | $219,101.00 |
| Final Estimated Portfolio Value | $349,101.00 |
💡 Compound interest accounts for over 62% ($219,101) of the total $349,101 portfolio value, demonstrating how consistent contributions combined with time amplify wealth accumulation.
How to use Investment Return Calculator
- 1
Enter your initial starting principal and your expected annual rate of return (e.g. 7% to 10% for broad stock market indexes).
- 2
Optionally specify a regular monthly or annual contribution to model dollar-cost averaging investment strategies.
- 3
Enter your investment time horizon in years and select your compounding frequency (annual or monthly).
- 4
Review your total future portfolio balance, cumulative interest earned, and annual growth trajectory.
Why use this tool?
ROI and CAGR Analysis
Calculates total Return on Investment (ROI) alongside Compound Annual Growth Rate (CAGR) so you can compare multi-year assets on an equal annual footing.
Visual Breakdown of Principal vs Earnings
Clearly separates your hard-earned contributed cash from generated compound market returns across your investment horizon.
Continue your workflow
Want to experiment with high-yield savings accounts or certificate of deposit (CD) rates? Use the Calculate compound interest schedules.
See how future inflation impacts the real purchasing power of your investment returns with the Adjust returns for purchasing power.
Debating whether to invest extra cash or pay down an existing mortgage or loan? Check the Compare investing returns vs debt payoff.
Frequently asked questions
What is the difference between ROI and CAGR?
ROI (Return on Investment) measures total aggregate return from start to finish without regard to time. For example, doubling your money is a 100% ROI. CAGR (Compound Annual Growth Rate) annualizes that return across the holding period: doubling your money in 7 years represents a 10.4% CAGR, while doubling it over 10 years represents a 7.2% CAGR.
What is a realistic annual rate of return to assume for long-term investments?
Historically, the S&P 500 index has returned roughly 10% annualized before inflation (around 7% after inflation) over multi-decade periods. Conservative balanced portfolios (60% equities, 40% fixed income) typically assume 5% to 7% annual returns.
How does compounding frequency impact investment returns?
The more frequently interest is compounded, the faster your money grows because you earn interest on previously credited interest sooner. Monthly compounding yields slightly more than annual compounding, though the difference is modest compared to the impact of the interest rate itself and the length of your investment horizon.
How do taxes impact my real investment returns?
In taxable brokerage accounts, dividends and realized capital gains are subject to taxes in the year they occur. Holding investments inside tax-advantaged accounts (like an IRA or 401(k)) allows investments to compound tax-free or tax-deferred, dramatically increasing your terminal wealth.
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