Recurring Investment Calculator with Front-Loaded and Back-Loaded Monthly Investments
Use this calculator to see how investing large amounts of money in the beginning years of a systematic investment program increases your overall return in the long run. Front-loading your early investments with relatively more dollars amplify the effect of compounding over time. By comparison in some cases reversing the strategy—investing less early and more later—you will actually end up with significantly less money.
Here is an example. Assume you invested $1,000 for the first 20 years at an annual return of 5% and you invested $500 for the next 20 years at an annual return of 5%. At the end of 40 years you would have $1,326,005.42 having invested $360,000.00 for a return on investment (ROI) of 268.33%.
Now, assume you invested $500 for the first 20 years at an annual return of 5% and you invested $1,000 for the next 20 years at an annual return of 5%. At the end of 40 years you would have $972,562.44 having invested $360,000.00 for a return on investment (ROI) of 170.16%. The $1,000 investments in the second 20 years have fewer years of compounding than the $1,000 in the first 20 years, thus the the difference. And the ROI is much lower because you invested the same amount of money and received a lower final amount.
What happens if you shorten the front-end period? If you invested $1,000 for five years and $500 for the next 35 years, you would have $961,965.50 having invested only $270,000.00 for a return on investment (ROI) of 256.28%. Here you invested considerably less which boosted your return on investment.
The calculator is easy to use so you can experiment with different front-end and back-end investment amounts and periods that fit your investing style and goals.