Investment Loan

Definitions


Loan amount
This is the total loan amount you are planning on taking out. This amount is also used as the initial value of the appreciable asset or investment that you are making.

Loan term in years
The number of years you wish to analyze for this loan. This can be any number from one to 30 years.

Loan interest rate
The annual interest rate you are charged for this loan. This calculator assumes that your payments are made monthly and that interest is compounded monthly.

Investment rate of return
This is the annually compounded rate of return you expect from your investments. For the purposes of this calculator, taxation is not factored into the results. If you pay taxes on the interest, dividends or capital gains from these investments you may wish to enter your after tax rate of return.
The actual rate of return is largely dependant on the type of investments you select. From January 1970 to December 2006, the average compounded rate of return for the S&P 500, including reinvestment of dividends, was approximately 11.5% per year (source: www.standardandpoors.com). During this period, the highest 12-month return was 61%, and the lowest was -39%. Savings accounts at a bank pay as little as 1% or less.
It is important to remember that future rates of return can't be predicted with certainty and that investments that pay higher rates of return are subject to higher risk and volatility. The actual rate of return on investments can vary widely over time, especially for long-term investments. This includes the potential loss of principal on your investment. It is not possible to invest directly in an index and the compounded rate of return noted above does not reflect additional sales charges and fees that funds may charge.

Percent reinvested
This is the percentage of the return generated by your investment that is reinvested. For example, if your investment generates $1,000 per month and you reinvest 50% you will the value of your investment will increase by $500.