Index Fund Calculator

Index Fund Calculator to calculate yearly returns for your index fund investments. The index fund return calculator has option to include annual contributions.

What is an index fund?

An index fund is a mutual fund or exchange-traded fund (ETFs) that track the performance of certain stocks, or a sector or stocks. For example, SPY and QQQ are both well-known exchange-traded funds, where SPY tracks the performance of the Standard & Poor's 500 index and QQQ tracks the 100 of the largest companies listed on the Nasdaq stock exchange.

Why invest in index funds?

There are many good reasons to invest in index funds rather than stocks or other types of investments for most people. By buying an individual stock, one is exposed to lots of risks as any individual stock could go bankrupt. There were many well-known companies going under during the 2008 financial crisis, like Bear Stearns.

By investing in index funds, one reduces risks by broad diversification as he or she is owning a bunch of different stocks rather than one.

On top of that, many index funds pay dividends. SPY is paying a 1.78% dividend and QQQ also pays a dividend of $1.77 per share. This makes index funds a better investment than many of the alternatives such as bonds.

The disadvantage of owning index funds, when compared to stocks, is index funds usually have lower returns than stocks. Professional investors and traders may own stocks like Tesla where the stock went up over 1,000% in a single year in 2020, you can never expect this kind of return with index funds. In other words, index funds are a type of investment that offers lower risk and lower return.

How to calculate investment fund return?

By using our index fund return calculator, you can easily calculate how much your money will grow. You can enter an initial investment or starting amount, and the years to grow, and the rate of return per year.

Our index fund calculator will give you an amortization table that shows how much your money will grow each year. You also have the option to increase your position by annual contributions.