To show growth in a 30-year term for an investment, we need to consider the initial investment amount, the average annual rate of return, and the compounding frequency.
The formula for calculating the future value of an investment is:
Future Value (FV) = PV * (1 + r/n)^(n*t)
Where:
PV is the present value or initial investment amount
r is the annual rate of return (expressed as a decimal)
n is the number of times interest is compounded per year
t is the number of years
For simplicity, let's assume an initial investment of $10,000, an average annual rate of return of 7% (which is close to the historical average of the stock market, including the S&P 500), and annual compounding (n = 1).
FV = $10,000 * (1 + 0.07/1)^(1*30) FV = $10,000 * (1.07)^30 FV ≈ $76,123
With these assumptions, the initial investment of $10,000 would grow to approximately $76,123 over a 30-year period.
Keep in mind that this is a simplified example, and actual investment returns may vary depending on factors such as market performance, investment product selection, and fees.
It is also important to consider the impact of inflation, which reduces the purchasing power of money over time. To account for inflation, investors may use real rates of return, which are adjusted for inflation, in their calculations. The link to calculate the compound interest: There are many online compound interest calculators available that can help you compute compound interest quickly and easily.
One of the most popular and widely-used calculators is provided by the U.S. Securities and Exchange Commission (SEC) as part of their investor education tools.
Here's the link to the SEC's Compound Interest Calculator: https://www.investor.gov/financial-tools-calculators/calculators/compound-interest-calculator
You can use this calculator to estimate the growth of an investment based on an initial principal, interest rate, compounding frequency, and the investment period.
Keep in mind that actual investment returns may vary, and this calculator is intended for educational purposes only.
Resources:
"The Richest Man in Babylon" by George S. Clason
"The Little Book of Common Sense Investing" by John C. Bogle
"The Intelligent Investor" by Benjamin Graham
"One Up On Wall Street" by Peter Lynch
"A Random Walk Down Wall Street" by Burton G. Malkiel
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