Nominal value is a flattering number
Almost every investment projection you see online reports the nominal figure — the raw dollar total at the end. It is technically correct and practically misleading, because those future dollars buy less than today's do. $1,000,000 in thirty years at 2.5% inflation has roughly the purchasing power of $477,000 today.
That is why this calculator reports both. Plan your retirement, your house deposit or your children's education against the inflation-adjusted column, and treat the nominal column as trivia.
Fees compound too
A 1% fee sounds like 1% of the outcome. It is not. The fee is charged every year on the whole balance, and every dollar it removes also stops earning. On a 30-year horizon at 8%, moving from a 0.05% index fund to a 1.0% actively managed fund can cost roughly 20–25% of the final portfolio. Set the fee field to 1% and then to 0.05% and watch the “lost to fees” figure move.
Risk, diversification and what you are actually buying
An expected return is not a promise; it is the average outcome of a distribution, and the width of that distribution is the risk. Broad stock indices have historically returned around 10% nominally, but with individual years ranging from roughly −37% to +37%.
| Asset | Long-run nominal return | Worst common drawdown |
|---|---|---|
| Cash / savings | 2–5% | None nominally — loses to inflation |
| Government bonds | 3–5% | 10–20% |
| Broad stock index | 7–10% | 40–55% |
| Single company | Anything | 100% |
The bottom row is the one to sit with. Individual companies can and do go to zero; an index cannot, because it continuously replaces failures with survivors. That is the entire mechanical argument for diversification, and it costs nothing to implement.
Your time horizon should drive the mix more than your appetite for excitement. Money needed within five years has no business being in equities, because there is no reliable way to guarantee it will have recovered by the time you need it. Money not needed for twenty years has historically had ample time to ride out even severe falls.
The largest destroyer of real-world returns is not fees or bad fund picking — it is selling during a fall and buying back after the recovery. A written plan you follow mechanically beats a better plan you abandon.
What the projection cannot know
This is arithmetic, not a forecast. Real returns arrive unevenly and the order matters, especially near retirement — a bad first five years of withdrawals damages a portfolio far more than the same bad years at the start of accumulation. Three habits make the maths more likely to work out:
- Automate the monthly contribution so the plan does not depend on willpower.
- Diversify so one company's failure is not your failure.
- Keep costs low, because it is the only variable in the model you fully control.
Nothing here is financial advice, and past averages are not a promise. Use it to compare scenarios, not to predict one.