This page documents the assumptions behind every InvestCalculator calculator so you can check our work. All amounts are in US dollars. All rates you enter are annual percentages. Results are hypothetical: they assume a constant rate of return every year, which real investments never deliver.
Monthly simulation
All calculators simulate your portfolio one month (or one contribution period) at a time rather than using a single formula. This lets us handle yearly contribution increases, different deposit timing, dividend payment schedules and taxes consistently. For simple cases the simulation produces exactly the same result as the standard closed-form formulas, and our automated tests verify this.
Converting annual rates
- Investment calculator: the annual return is treated as a nominal rate compounded monthly (monthly rate = annual rate ÷ 12).
- Compound interest calculator: the stated rate is compounded at the frequency you choose. To combine any compounding frequency with monthly deposits, we use the equivalent monthly rate (1 + r/n)n/12 − 1. The effective annual yield (APY) shown is (1 + r/n)n − 1.
- DCA and dividend calculators: the annual return or price growth is treated as an effective annual rate and converted to the period rate (1 + r)1/p − 1, where p is the number of periods per year.
Contribution timing
- Investment and compound interest calculators: deposits at the end of each month by default (an ordinary annuity). The compound interest calculator can switch to start-of-month deposits.
- DCA projection: each purchase is made at the start of its period and grows for that full period.
- Dividend and DRIP calculators: monthly contributions buy shares at that month's projected price.
- Yearly increases are applied once every 12 months.
Inflation
The inflation-adjusted balance divides the nominal balance by (1 + inflation)years. It answers: what would this amount buy in today's dollars?
Dollar cost averaging
The lump-sum comparison invests the same total amount you contributed through DCA on day one and grows it at the same constant return. Average cost per share is total dollars invested ÷ total shares bought, which equals the harmonic mean of the purchase prices when the dollar amount per purchase is fixed.
Dividends and DRIP
- Starting annual dividend per share = share price × dividend yield.
- The dividend per share increases once a year by the dividend growth rate.
- The share price grows smoothly each month at the price growth rate.
- Dividends are paid evenly 1, 2, 4 or 12 times a year. Each payment is reduced by the tax rate you enter.
- With reinvestment, the after-tax payment buys shares at that month's price (fractional shares allowed, no fees). Without reinvestment, payments accumulate as cash earning nothing.
- Annual income shown for the final year is shares owned × that year's dividend per share × (1 − tax rate).
- Yield on cost = annual dividend income ÷ total contributions.
What we do not model
- Year-to-year volatility, sequence of returns and market crashes.
- Fund expense ratios, advisory fees and trading costs (subtract them from your return to approximate).
- Taxes on capital gains, interest, or withdrawals; state taxes.
- Dividend cuts or suspensions; ex-dividend dates.
Review and updates
Calculator logic and explanations were last reviewed on 2026-11-09. Report a problem at yhhhhs233@gmail.com.