Mutual Fund Calculator

With so many different mutual funds to choose from, how do you know you are picking the best fund? It helps to visualize your long-term returns. With the help of our mutual fund calculator below, you can calculate your mutual fund returns years down the road. Our calculator shows you the power of compounding, while factoring in inflation and tax rates. Here’s how it works:

  • Enter the number of years you expect to have your money in the mutual fund.
  • Enter the estimated rate of return.
  • Enter the initial investment amount. Be aware that many funds have minimum initial investments.
  • Enter the annual investments you anticipate adding.
  • Enter the inflation rate percentage.
  • Enter the tax rate percentage.
  • You can select whether or not you’d like your annual investments and/ or total results to be adjusted for inflation.
  • Hit calculate!

Mutual Fund Calculator Results Explained

The investment return calculator shows the Invested Capital Total in green, Simple Interest Total in red, and the Compound Interest Total in blue. You can hover over each section to see the value of each color.

You’ll notice in the graph above that your returns grow exponentially over a longer period of time. This is the power of compound interest. Compounding is when earnings or interest is added to your original investment, which generates greater earnings and/or interest. As the investment grows larger, the growth gets faster.

Should You Invest in Mutual Funds? 

Mutual funds are a popular investment vehicle, but they aren’t necessarily the best. Our Chief Income Strategist, Marc Lichtenfeld, has listed some of the downsides below…

  • Higher expenses: You’re already starting out a 0.6% disadvantage in the average fund. In many funds, you’ll pay over 1%. That means just to keep pace with the market, the fund needs to beat it by a considerable margin. And that’s not easy to do, because…
  • Funds aren’t flexible: A mutual fund has to stick to its mandate. If it’s a large cap fund it can’t invest in small cap stocks… a value fund won’t buy a momentum or growth stock… etc. As an individual investor, you can diversify your portfolio to include a variety of market caps, sectors and strategies.
  • A fund can’t buy small winners: The biggest advantage you have as an individual investor over a mutual fund is the ability to choose some small stocks that can become big winners. A multi-million dollar mutual fund can’t invest in a small stock without moving the share price higher. That would impact their returns, so they mostly ignore small names. As an individual investor you get to choose small winners.
  • Size matters: Another disadvantage of mutual funds is that in order to accumulate a meaningful position in a stock, it can take days or weeks to buy enough stock. An individual investor can accomplish this in one day.

With these downsides in mind, you may want to consider avoiding mutual funds. ETFs can be  a strong option for some investors, and to learn more read our ETF Investing section.

Remember, our mutual fund calculator above doubles as an investment return calculator. You can calculate returns on dividend stocks, ETFs, REITs and more.