Question 1

How does compound interest work for investments?

Accepted Answer

Compound interest means you earn interest on both your original investment and on the interest you've already earned. Over time, this creates exponential growth — the longer you invest, the faster your money grows.

Question 2

What is a good annual return rate?

Accepted Answer

Historically, the S&P 500 has returned about 10% per year on average (before inflation). Bond investments typically return 4-6%. A diversified portfolio might target 7-8% annually.

Question 3

How often should I contribute to my investment?

Accepted Answer

Regular contributions (monthly or biweekly) take advantage of dollar-cost averaging, which reduces the impact of market volatility. Consistent investing over time generally yields better results than trying to time the market.

Question 4

Does this calculator account for inflation?

Accepted Answer

This calculator shows nominal returns. To account for inflation, you can lower your expected return rate by the average inflation rate (historically about 3% per year in the US).