This page explains how the ETF Calculator arrives at its result. Everything happens in your own browser.
Compounding every month
The calculator works month by month. The expected annual return is divided by 12: 6% a year becomes 0.5% a month. Each month the balance grows by that percentage, and earlier growth grows along with it. 6% a year is applied as 0.5% per month, which compounds to about 6.17% a year. The 6% itself is an illustrative assumption, not a forecast: you can enter any return.
Contributions
The starting amount is there from the beginning. The monthly contribution is added at the end of each month and starts growing the month after. Example: with €5,000 to start and €500 a month, the balance after the first month is €5,000 × 1.005 + €500 = €5,525.
If you choose a yearly increase, the monthly contribution rises once a year by that percentage. At 2%, €500 becomes €510 a month in the second year. Amounts are rounded to whole cents every month.
Fund costs (TER)
A fund’s ongoing costs (TER) come off the return, also month by month. At a 6% return and 0.14% costs, the balance grows by (6% − 0.14%) / 12, about 0.488% a month, instead of 0.5%. Gross is the balance without fund costs, net the balance after costs. The difference between the two is the fee drag.
The costs of the listed funds come from the fund providers’ documents, such as the factsheet. If you choose ‘Enter your own costs’, you fill in a TER yourself.
A worked example
With the example settings (€5,000 start, €500 a month, 25 years, 6% gross a year, 0.14% costs) you put in €155,000 in total. Gross, that grows to about €368,822; net, to about €360,688. The fee drag is about €8,134: 3.8% of the gross return of about €213,822.
Investing involves risk of loss. The figures presented by this calculator are for illustrative purposes only and do not constitute financial advice. Past performance does not guarantee future results.
The first three months, by hand
You can check the calculator with a pocket calculator. With the example settings, the balance at the end of each month is the previous balance times (1 + the monthly rate), rounded to whole cents, plus the contribution.
| Month | Without fund costs | After 0.14% costs |
|---|---|---|
| 1 | €5,525.00 | €5,524.42 |
| 2 | €6,052.62 | €6,051.40 |
| 3 | €6,582.88 | €6,580.95 |
The gap is small at first (€1.93 after three months) and grows as the balance grows. The calculator repeats this step 300 times for 25 years and rounds to whole cents every month, so rounding errors do not build up. Amounts elsewhere on the site are rounded to whole euros.
Checking the result
There is also a closed formula for the same calculation: the balance is the starting amount × (1 + r)n plus the monthly amount × ((1 + r)n − 1) / r, where r is the monthly rate and n the number of months. The site’s tests compare the calculator with this formula. At a return of 0% the balance simply grows by the contribution every month. The calculator’s own slider starts at 1%, so 0% is a boundary case the formula and the tests cover, not a setting you can choose there.
If you choose an inflation rate
The calculator then works with the real return: (1 + return) / (1 + inflation) − 1. At 6% a year and 2% inflation that is about 3.9% a year. With the example settings the balance after costs after 25 years is then about €262,060 in today’s money, instead of €360,688. The inflation rate is your own assumption; the calculator uses no real inflation figures.
If dividends are paid out
By default all income stays invested, as in an accumulating fund. In the cash-dividend setting, a yield you choose is taken out as cash every month and no longer compounds. For a one-off €10,000 over 10 years at 6% before costs, 0.14% costs and an assumed yield of 1.24% (an assumption for this illustration, not a figure for a fund), the reinvested balance is €17,942. With the dividends paid out as cash, the fund balance is €15,858 and the cash is €1,572: €17,431 together if the cash earns nothing.
Limits of the inputs
- Starting amount: €0 to €100,000
- Monthly contribution: €0 to €2,500
- Return before costs: 1% to 15% a year
- Fund costs (TER): 0% to 2.5% a year
- Horizon: 0 to 40 years
- Yearly increase of the contribution: 0% to 10%
- Inflation: 0% to 10% a year
Values outside these limits are brought back to the nearest limit.
What is not included
By default, amounts are not adjusted for inflation. Under ‘Advanced’ you can choose an inflation rate per year yourself; the calculator uses no real inflation figures. No taxes (such as the Dutch Box 3), transaction costs or dividend withholding tax. The return is the same every month in the calculator; real returns vary and can be negative.
Source of the figures: the ETF calculator's own calculation engine, under the assumptions in the text. How the calculator works