Net monthly factor
a = [(1 + return) × (1 − annual fee)]^(1/12)Return and percentage fees are combined multiplicatively.
Investment Growth · Methodology
How the calculation works
Illustrate how contributions, returns, fees and inflation could shape an investment over time.
Return to calculatorIncluded
- Low, central and high deterministic scenarios
- Fixed or increasing monthly contributions
- Percentage, fixed, contribution, initial and exit fees
- Today-money and future-money values
- A user-controlled market-shock scenario and optional target
Outside this method
- Return probabilities or Monte Carlo simulation
- Investment or asset-allocation recommendations
- Automatic pension or investment tax
- Retirement withdrawals
- Any claim that investments grow smoothly
Calculation
Core formulas
Month-end contribution
Bₘ = Bₘ₋₁ × a + contribution × (1 − charge) − fixed feeRegular contributions enter at month end.
Today-money value
Real value = nominal value ÷ (1 + inflation)^yearsNominal and real values describe the same projected balance.
Fee drag
No-fee value − after-fee valueThis includes fees and the compound growth lost on them.
Timing convention
When cash flows occur
Returns and percentage fees compound monthly. Contributions enter at month end. The optional shock replaces the central return during the selected year.
Limitations
What the result cannot establish
- User-entered returns may be optimistic or arbitrary.
- Constant returns conceal volatility and sequence effects.
- General inflation may not match personal spending.
- Tax and wrapper limits are not calculated.
Reference tests
Numerical checks
| Case | Inputs | Expected result |
|---|---|---|
| Lump-sum compounding | £10,000; 5% return; 10 years | £16,288.95 |
| Monthly contributions | £100 monthly; 5% effective return; 12 months | £1,227.26 |
| Ongoing fee drag | £100,000; 5% return; 1% fee; 10 years | £147,314.31 after fees |
Evidence