Making consistent investments over a number of years can be an effective strategy to accumulate wealth. Even small additions to your investment add up over time. Of course, a program of regular investing does not ensure a profit or protect against a loss. This calculator demonstrates how this investment strategy might work for you.

Definitions

Starting amount

The amount invested at the start of the period.

Years to invest

The number of years you are planning to invest.

Additional contributions

The amount you will invest at the beginning of each period. You can specify monthly, quarterly or annual contributions.

Hypothetical annual rate of return

The expected annual return for your investment. If you plan on withdrawing your money within 10 years, you may want to choose a more conservative rate of return. Since 1926, the average annual total return for the S&P 500, an unmanaged index of large U.S. stocks, has been nearly 10%. Investments that offer the potential for higher rates of return also come with a higher degree of risk. Hypothetical rates of return are for illustrative purposes only and are not intended to portray actual results. Actual rates of return will vary over time. Past results are not predictive of results in future periods.

Compounding frequency

The frequency that earnings from your investments are added to your account. The more frequent the compounding, the sooner accumulated earnings can start generating additional earnings. Earnings from stocks and mutual funds that invest in stocks are often compounded annually. Earnings from bonds, bond funds, savings accounts and CDs are generally compounded more frequently.

Investors should carefully consider the investment objectives, risks, charges and expenses of the American Funds. This and other important information is contained in each fund’s prospectus and/or summary prospectus, which can be obtained from your plan’s financial professional or downloaded and should be read carefully before investing.

This calculator was developed by KJE Computer Solutions, which is not affiliated with American Funds. It is intended for use in making a rough estimate of how your investments can grow over time. We do not guarantee the accuracy of the results or their relevance to your particular circumstances. We encourage you to seek the assistance of your financial professional.

This calculator does not show the effect of taxes on a taxable account. The Taxes and inflation calculator will help you determine the effects of taxes and inflation on your savings.

For more information regarding this calculator or its calculations, please e-mail KJE Computer Solutions at afquestions@dinkytown.net or visit http://www.dinkytown.net.

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