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Return on Investment Calculator

Return on Investment Calculator Precise Manipulations

The singular factor that determines investments is the return or the profit that an investor expects to gain from the particular investment. To determine whether investments are profitable or not, its returns have to be calculated accurately. This focuses on the significance of investment calculators that accurately calculate the investment returns.

Defining Investment Calculators

Investment calculators calculate the returns that a particular investment would yield after the maturity period. Investors need to calculate the future returns for making current investments and ensure that the investments would be profitable for them. Usually, the investment calculators calculate the returns on an annual basis. With the help of the calculators, the investors can calculate the returns that they can earn by liquidating the investments after a particular time period. The calculator assumes simple interest rather than compound interest on investments.

Functions of Investment Calculators

Investment calculators are used for various aspects related to investments. Some of the main uses of investment calculators are as follows:

1) Interest Rate: The premier function of investments is to calculate the rate of return or the rate of interest that the investments are expected to earn within a fixed period of time. It calculates the compound rate of interest that an investor expects from a particular investment. The calculator calculates these returns considering that there are no tax deductions. The rate of return is calculated considering the type of investments.

2) Investment Risk: It is necessary to calculate the risk to returns ratio before making the investments. Investors can earn higher returns by taking higher risks. Hence, it is essential to calculate the extent of risk that an individual needs to take in order to gain the required returns.

3) Compound Interest: Investment calculators perform an important task of calculating the compound interest that an investor earns. Compound interest refers to the current interest earned in addition to the interest of the previous year. Compound interest is difficult to calculate as interest rates keep on changing with market fluctuations.

4) Initial Investment: The investment calculator also calculates the initial investment that an investor has made.

5) Inflationary Rate: Inflationary rate is constantly fluctuating and due to it the value of the returns also changes. Hence, it is necessary to calculate the returns considering the inflationary rate fluctuations.

6) Tax Constraints: The investment calculators calculate the tax constraints or tax impositions on an investment that an investor is liable to. This calculation is important as it gives the precise idea to the individual about the amount that he would eventually get by reducing the taxes.

7) Simple Interest: The investment calculator also performs the function of calculating simple interest that an investment earns. This interest is calculated after deducting the tax amount. Hence, it calculates the net investment returns that an investor is expected to earn.

Types of Investment Calculators

There are different calculators in order to calculate the various aspects of investments independently. The specialized calculators indicate the effect that each factor has on the total returns on the investments. Some of the important types of calculators are as follows:

1) Time Value Calculator: As the name suggests, this type of calculator analyses the effect of time on investment returns. The calculator calculates the effect of time on the basis of the initial investment amount and the additional amount that an investor intends to invest. It also considers the time intervals between subsequent investments. The investors can calculate the rate of returns that they would get after a particular period of time.

2) Cost Averaging Calculators: This type of calculator calculates the returns on the basis of the monthly investments made by an individual and also the price of every share that the investor has purchased. With this calculator investors can get a fair idea of the returns that different shares of different profiles are expected to provide. The calculators can consider shares of rising, declining and fluctuating natures.

3) Inflationary Calculator: This calculator calculates the returns on the basis of the inflationary trends prevailing in the country. This is important as inflation can reduce the value of the returns.

4) Real Estate Investment Calculator: There are calculators that exclusively determine the value of returns acquired from real estate investments. These calculators consider the loan payments and the real estate market conditions while determining the value of the returns.

5) There are some other calculators that calculate the exact value of stocks, debts and shares that an investor may earn after a period of time or after the maturity period.

Tips for Investment Calculators

To get the accurate rate of returns, it is important that the investor follows certain tips for using the calculators. The calculators are complex mechanisms that calculate the rate of returns precisely by following the tips given below:

1) Investors must begin on a trial basis. They must first calculate the returns on investments through examples and ensure that they are handling the calculators perfectly. Once the investor has perfected the art of using it, he can then move on to calculating the returns for his personal investments.

2) It is essential that the investor use the calculator on a regular basis in order to make the calculations properly.

3) Investors must calculate the returns by considering various rates of interest. This provides them with a good idea about the returns they can expect if the market rate of interest fluctuates to various rates.

4) Investors must also calculate the amount that they need to save every year in order to invest in their desired instruments. It is also important for the investors to consider the period left till they get retired and the amount of savings that they need to do on this basis.

5) Along with every type of calculator, there are instructions provided for the benefit and smooth use of the investor. The investors must follow the given steps and instructions carefully while making the calculations.

Investment returns calculators are imperative and extremely necessary for the investors. They give the exact amount that the investors stand to gain by making a certain investment. Hence, investors must have an access to an investment calculator that calculates the returns accurately.