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Author Topic: What can i expect to earn at the end of the investment period?  (Read 25 times)
AGA92
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« on: July 20, 2011, 07:43:42 PM »

If I take out a growth mutual fund and contribute $35,000 annually for 12 years, what can i expect to earn at the end? i know most growth mutual funds offer a 15-18% rate of return. all help appreciated. thanks.
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Peace4_A
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« Reply #1 on: July 21, 2011, 04:49:45 AM »

This is a very hypothetical question because you are assuming that each and every year this fund will be returning and inflation adjusted 12-15% The only thing that is constant will be your principal contribution increasing by $35k per year for 12 years..  No one knows what the stock market will be doing in the next 6 months never mind in 12 years.  When the market sentiment becomes negative everything goes down due to fear of loss.  

As as financial advisor on Wall Street previously I have seen many different cases where some have made tremendous amounts of return and others have amounted only losses during a 12 year period.

If you are looking for way to guarantee your returns there is only one way to do it.  This way will allow you to participate on the upside of the stock market but will not lose principal.
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Jessica_Collins
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« Reply #2 on: July 21, 2011, 06:32:35 AM »

With 15% return every 5 years you get your money double.

after 5 years money grow to $70000
after 10 years it is $140000
and next two years $183540
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Steve_Gomez
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« Reply #3 on: July 22, 2011, 01:47:10 AM »

I hope your investment amount grow 10 times in 12 years with expected return of 18%
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John_W
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« Reply #4 on: July 22, 2011, 04:42:20 AM »

You do realize that when they say "Growth Mutual Fund" they aren't actually referring to the growth of your portfolio.   They are saying that they are restricting the stock selections to stocks that do not pay dividends hence the only way for an investor to benefit from profit is if the profit is reinvested in the growth of the business thereby increasing the value of the equity.   Such stocks tend to be companies in an expansion phase of their business model and hopefully have not yet depleted their market which all business models eventually do.   Evaluating the value of such stocks is far more speculative than evaluating the value of an income stock which are those that do pay dividends.   It doesn't seem reasonable to me to limit a fund manager entirely to growth stocks simply because the word "growth" has a connotation of an increase in wealth when it's use to describe the fund has nothing to do with increasing your wealth.   If I'm to pay for a fund manager, I would expect him to be able to allocate assets between both growth and income stocks and hence I consider those growth only funds to be mostly marketing.   Although it is possible to garner a 15% to 18% return, I doubt very much that most growth mutual funds produce such returns and indeed many of these funds also are aggressive funds with a high percentage of their portfolio in stocks rendering them unable to take advantage of market downturns.   Such a portfolio construction may show reasonable gains for a period of time but are likely to eventually be wiped out by volatility as they have no defense against a negative correlated event.

As to calculating what you would have from say a 15% interest rate.  If we assume that you are investing $35,000 annually at the end of each year for 12 years, the equation works out as a summation of a finite geometric sequence and would be:

FV = $35,000 * ( 1 - 1.15^12 ) / ( 1 - 1.15 )
.:
FV = $1,015,058.36

But I doubt you'll be able to achieve such returns till you learn how to select mutual funds beyond the marketing application of various words.
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David_Junior
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« Reply #5 on: July 22, 2011, 05:09:10 AM »

Growth mutual fund are the funds that investing on growth companies (i.e. those who look for growth and expanding which means no dividends payment).
Most of them pay around the ranged you mentioned 15%.
I prefer to invest and manage my own money by myself, i can generate more.
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Ramon_Farris
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« Reply #6 on: July 22, 2011, 06:02:17 AM »

Mutual fund gives good return for long period here you also invest every year $35000 you get average of market advance and decline it's help you to minimize your risk and maximize your profit.
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Joshua_Polk
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« Reply #7 on: July 22, 2011, 07:01:38 AM »

15% compounding anuualy is good return in mutual fund you can expect it
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