How to Calculate the Future Value of Long-Term Investments
Be Aware of Scams and Use an Interest Profit Calculator
Anyone who is considering a long-term investment should know how to prevent financial fraud and use an investment calculator. In the past, we've been exposing many scams related to investments with high returns. Today we want to keep educating the readers with the other aspects of the right investments and calculations. Let's take a look.
An interest profit calculator is a simple online tool that allows an investor to know how much money their investments can make them in the long run. An interest profit calculator is of more use to people making long term and lower risk investments than short-term and higher risk investments.
With an investment calculator, one enters the amount of money they are investing and their return rate. They may also add a variety of other information such as additional contributions they are planning to make each year in the future. After they enter this information, the interest profit calculator will tell them how much their investment will be worth each year in the future. Most of these simple online tools will give the user information such as graphs and pie charts as well as textual information.
Here is some basic information to consider:
The Return Rate
People see the return rate as the most important number when considering an investment. In the long run, an investment with twice the annual return rate will grow to be much more than twice as large. If one begins investing early and has a high annual return rate, they can have an earlier and wealthier retirement.
The Starting Amount
If one doubles the value of their starting amount and does not make any additional contributions, they end up with twice as much money in the long run. One does not end up with more than twice as much money as a result of doubling their starting investment. In the long term, the return rate, therefore, becomes more important than the size of the starting investment.
Additional contributions are usually part of a successful long term investment plan. As well as beginning with a fair bit of money, an investor should increase their investments over the years. Any useful interest rate calculator will be able to calculate the effect of additional contributions.
Different Types of Investments
Some types of long term investments result in a higher rate of annual return than others. However, some long term investments are less safe than others.
Certificates of Deposit
The certificate of deposit is one of the safest types of investment there is. In the United States, the government guarantees a certificate of deposit within some limitations. It is easy to calculate the future value of a safe and predictable certificate of deposit. One can easily find an online interest calculator that can calculate interest from certificates of deposit.
One of the best long term investments one can make is a real estate investment. One can either purchase a house and sell it for more money at a later date or purchase a home and rent it to others. Many people who successfully retire do so through the use of rental properties. There is somewhat of a time investment involved if one wants to own a rental property.
One might end up having to deal with and at worst having to evict problematic tenants. There is also the risk of having to sell the house for less than one bought it for. However, the expected return on investment that one can make with a real estate investment is quite good.
A different type of interest profit calculator helps determine the viability of one's rental property investment. Many various fields of information are used for such a calculation. Maintenance costs, taxes, rent prices and assumed annual increases in rent and expenses are all included in these calculations. One will have to use some estimation when entering this information.
For example, one cannot know in advance how much of the time their house is going to lack tenants. One should not be unrealistically optimistic with this information, or else they may end up with a weak or disappointing investment.
The Stock Market
Stock market investments do not give a fixed annual return and can easily result in losses. However, stocks are not always high-risk investments. Some stocks are much less risky than others. One can usually do better with stock market investments than with safer certificates of deposit. Online tools can also calculate the long run of stock market investments, including information such as dividends. The actual result of one's investment is sure to be either better or worse than they estimate.
Bonds allow individuals to lend money to businesses. If a company wants to borrow money, it can do so by selling bonds that individuals can buy and hope to sell for more money in the future. However, there is the risk that the company will be unable to pay its debts, and in that case, those who buy bonds can lose money. The safest bonds are government bonds. Bonds issued by companies are more dangerous if the company involved has a lot of debt and may end up going bankrupt if their business worsens.
An investor who purchases bonds should be aware of the financial status of the company they are buying the bond from. Bonds that offer an excellent annual return are often bonds for companies that are struggling to pay their debts. On another level, very cautions investors to perform worse on average than those with a bit of risk tolerance.
Many people consider investments in gold, silver, or oil to be relatively safe but still profitable investments. While shares in business might end up being worth nothing in the future, gold and oil will seemingly always have value. Wars and crises can cause the value of either gold or oil to increase. The value of silver does not only come from its scarcity but also from silver being an increasingly useful component in new technology. Unpredictable long term trends can either raise or lower the value of commodity investments.
An online investment calculator is usually less useful for calculating returns on commodity investments than for other types of investments. One does not know what their future annual returns will be. One can still use an online tool to estimate future profits, but one does not know what their rate of return will be in the long run. An online interest profit calculator is, therefore, more useful for investments in bonds and in rental properties.
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