FinSmart calculation guide
Compound calculation assumptions.
A compound calculator does not predict the future. It unfolds a set of assumptions into numbers. FinSmart adds the monthly contribution before applying that month's return, making the model similar to beginning-of-month contributions.
The repeated calculation
The annual assumed return is divided by 12, then the calculator repeats new balance = (previous balance + contribution) × (1 + monthly rate). A constant monthly rate is a simplification; real returns do not arrive evenly.
Beginning versus end of month
A beginning-of-month contribution receives that month's return. An end-of-month contribution starts compounding one month later. The difference grows with time, rate and contribution size.
What a fixed return hides
Two paths with the same average return can end differently, especially when contributions or withdrawals occur during volatile periods. The model does not automatically include losses, tax, fees, exchange rates or inflation.
Practical review
- Run optimistic, neutral and conservative rates.
- Compare total contributions with estimated growth.
- Reduce the assumed return when modelling fees or taxes.
- Remember that currency selection changes formatting, not exchange rates.
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