FV = PV(1+r)^n + PMT[((1+r)^n - 1) / r]
Where PV is initial investment, r is monthly net return (annual return minus expense ratio divided by 12), n is total months, and PMT is monthly contribution.
An Exchange-Traded Fund (ETF) is a type of investment fund that tracks an index, sector, commodity, or other asset, but can be purchased or sold on a stock exchange just like a regular stock. ETFs offer diversification similar to mutual funds but with the trading flexibility and typically lower expense ratios of individual stocks. Popular ETFs track broad market indexes like the S&P 500, making them an efficient way to invest in the overall market.
This calculator helps you project how your ETF investment could grow over time by factoring in your initial investment, regular monthly contributions, expected annual return, and the fund's expense ratio. The expense ratio is automatically deducted from the gross return to give you a more accurate picture of your net investment growth.
The expense ratio is the annual fee charged by an ETF to cover management and operational costs, expressed as a percentage of assets. For example, a 0.03% expense ratio means you pay $3 annually per $10,000 invested. Index ETFs typically have very low expense ratios (0.03%-0.20%), while actively managed ETFs may charge 0.50%-1.00% or more.
Even small differences in expense ratios can significantly impact long-term returns due to compounding. Over 30 years, the difference between a 0.03% and 0.50% expense ratio on a $100,000 investment with 8% returns could amount to tens of thousands of dollars in lost growth. This is why many investors prefer low-cost index ETFs for long-term wealth building.
This calculator uses a constant rate of return, but real-world ETF returns fluctuate year to year. Market downturns can temporarily reduce your portfolio value, though historically broad market ETFs have recovered and grown over long periods. Past performance is not indicative of future results.
The calculator does not account for taxes on dividends or capital gains, which can reduce your effective returns. Consider using tax-advantaged accounts (like IRAs or 401(k)s) to minimize tax impact. Always consult with a financial advisor before making significant investment decisions.