Investments are a critical part of anyone's financial future. However, much of the math and calculating involved in working on investments can be very difficult. It can be easy to make mistakes without realizing it, and steer your investment portfolio in a completely wrong and dangerous direction. Without confidence in your work, you will feel uneasy about comparing investments and about investing in general, and your results will suffer in turn. However, there is a simple and easy solution that can take care of all or most of the math for you, and will allow you to get back to being an investor instead of trying to be a mathematician. The solution to this problem is an investment calculator.
These investment calculators have a number of different purposes. With some calculators, you'll be able to decide if you can afford the costs of some investment property. With others, you'll be able to determine the likely range of growth for some variable-rate investment. Some investment calculators will even save a copy of your previous results so you can more easily compare different types of investments with different terms. Finally, some investment calculators help you to manage risk in your portfolio by determining if you're putting too much of your net worth in a single investment.
One of the most popular types of investment calculators will help you decide if you'll be able to afford some specific property for the purposes of investing. There are complicated calculations involved with a lot of different inputs because it's necessary to estimate both the costs and the potential for growth. Over time, a lot of costs can change like tax rates or utility bills. However, the basic methods of revenue increase as well, like when rent goes up a certain small percentage each year or you get larger tax deductions each year. To use this type of investment calculator, you'll input all of the important information about your potential investment, including expected growth rates for costs and revenue. In return, the calculator will output all of the information you'd ever need to know, like the chance of the costs ever being greater than the revenue generated, typical return rates, and so on.
The other most popular type of calculator for investments helps you to find the likely range of growth for a single investment or a small group of different investments. Unlike basic savings accounts, some investments don't have a set return rate each year. Instead, these investments work like a savings account would if it had a variable interest rate. Instead of having one possible path for growth to calculate, this type of investment will have a high number of possible paths for growth. This means that the investment will have a range of possible returns, and this range will form a bell curve. In this bell curve, the most likely return rates will be located in the center, and the least likely outcomes, including losing money on the investment, will be located on the edges. Calculators for investments with a variable return rate calculate what this bell curve will look like, tell you how likely different rates of return are, and will show you how likely you are to lose money on your investment.
All investment calculators work in basically the same way. All of the math work is done behind the scenes so that you don't even have to see it, and as the end user, you'll only have to work with the interface. For serious investors and people who just invest as a hobby, it's absolutely critical that you have a set of calculators specific to the type of investments you prefer.