Investment Return Calculator

Compound growth calculates returns on both the original principal and accumulated gains. The formula for a lump sum is: Future Value = Present Value x (1 + r)^n, where r is the annual return rate and n is the number of years. For regular monthly contributions, each payment compounds for a different duration, calculated using the future value of an annuity formula: FV = PMT x [((1 + r/12)^(12n) - 1) / (r/12)].

Nominal returns represent the headline growth rate before accounting for inflation. Real returns strip out inflation to show actual purchasing power gain. If your investment grows 7% nominally and inflation is 3%, your real return is approximately 3.88% (calculated as (1.07/1.03) - 1, not simply 7% - 3%). Over long periods this distinction is crucial: £100,000 growing at 7% nominal for 30 years reaches £761,226, but at 3% inflation its real purchasing power is only £352,365.

The calculator separates returns into components: original contributions, investment growth, and the effect of charges. Platform fees and fund charges compound negatively just as returns compound positively. A 1% annual charge on a £100,000 portfolio growing at 6% over 30 years costs approximately £132,000 in foregone growth — nearly as much as the original investment. The tool shows gross return, charges deducted, and net return side by side.

UK investment returns — historic averages. FTSE 100 total return (price + dividends): ~7-9% annually over 30+ years (varies). FTSE All-Share: similar. S&P 500 (US): ~10% annually (often used as global proxy). UK Gilts (government bonds): 3-5% historic. Cash savings: 2-4% historic (often negative real after inflation). Corporate bonds: 4-6%. Real returns after inflation (~3% UK long-term): equities 4-6%; bonds 0-2%; cash -1 to +1%. Past performance doesn't guarantee future — but equities have outperformed bonds 70%+ of 20-year periods globally.

Compound returns — the eighth wonder. £10,000 at 7% for 10 years: £19,672. 20 years: £38,697. 30 years: £76,123. 40 years: £149,745. Adding £200/month: 30 years grows to £321,000. Total invested £82,000; growth £239,000. Time in market beats timing the market — 20+ year horizons reduce risk dramatically. Rule of 72: years to double = 72 ÷ rate. 5% = 14.4 years; 7% = 10.3; 10% = 7.2. Annual returns compound multiplicatively, not additively.

UK tax-efficient investing. ISA £20,000/year — all gains tax-free, growth not counted toward CGT or Personal Savings Allowance. Pension: tax relief at marginal rate going in (20-45%), 25% tax-free withdrawal at 55 (rising to 57 in 2028). Junior ISA £9,000/year for children. Lifetime ISA (under 40): £4,000/year + 25% government bonus, first home or retirement. General Investment Account (GIA): taxable. CGT allowance £3,000 (2026/27 — down from £12,300 in 2022); dividend allowance £500. Use ISA/pension wrappers first; GIA only after maxing tax-shelters.

Active vs passive — UK platforms 2026. Passive (index funds): Vanguard LifeStrategy 80% Equity 0.22% OCF; iShares Core MSCI World 0.20%. Active funds: Fundsmith Equity 0.94% OCF; Lindsell Train UK Equity 0.66%. Best UK platforms: Vanguard (0.15% platform fee, low fund choice), Hargreaves Lansdown (0.45% platform fee, comprehensive), Interactive Investor (£11.99/month flat fee, best for £50k+), AJ Bell (0.25% platform fee). Lower fees = bigger long-term returns. 1% fee on £100k over 30 years costs £200,000+ in foregone growth.

Risk-adjusted returns and asset allocation. Younger investors (20s-40s): 80-100% equities — long horizon absorbs volatility. Mid-career (40s-50s): 60-80% equities, 20-40% bonds. Approaching retirement (50s-60s): 40-60% equities. Retired: 20-50% equities. Diversification: 100 stocks rather than 10; global rather than UK-only (UK is 4% world market cap). Standard deviation of equity returns: ~15% annually. Means: 1-year returns can range -25% to +35% but 20-year average steady 6-9%. Don't panic-sell in downturns — sell low, buy high is the path to loss.