Wednesday, February 29, 2012

Fun Calculators & Tools

"Fun Calculators"?  Yeah, there is such a thing.  At least I think so.  When calculators can prove how much your money can grow they can certainly be fun.  They can also help motivate you to stick with your investing goals.

In some of my posts I have referenced how money invested over a certain period of time growing at a percentage can grow to a large sum of money.  Some you have asked how I got this number... basically you want me to show my work.  I think this is a good idea, and probably something I should have done awhile ago.  Instead of showing you though I'm going to provide you with my Excel calculators that I use.

Hopefully you'll have "fun" playing with the inputs too so you can see how your own investments can grow if you stick with a dividend growth investment plan.

I will be creating a page on my site that will link to the following Excel models and hopefully more.

  • Drip Calculator.xls - This file will show you the beauty of compounding when you reinvest your dividends.  You need to input the following:
    • Initial Investment - How much your initial investment in the stock(s) is.
    • Monthly Contribution - How much you are committed to contributing each month
    • Initial Dividend Yield - What was the dividend yield of the stock (or average yield if investing in more than one) when you made your initial investment
    • Dividend Growth Rate - This is the estimated annual dividend growth rate.  A very conservative rate would be 6%, a high estimated rate would be 15%.
    • Stock Growth Rate - This is the estimated annual growth rate for a stock.  A very conservative rate would be 6%, a high estimated rate would be 15%.
    • Dividend Tax Rate - Use 0% for Roth IRA.   For taxable accounts use 15% (as of 2012).
  • The Value of Time.xls - This file does a great job of displaying why it is so important to invest early in life.  It tells the story of the early investor vs the late investor.  The early investor invested $5,000 a year from ages 18-27 and then stopped for a total of $50,000 invested.  The late investor started investing $5,000 a year at age 30 and continued until age 65 for a total of $180,000 invested.  Both had an average rate of return of 11%. Guess who made $2.5 million more over the life of their investments?
So hopefully you have some fun playing with these like I do.  Math can be fun... when it shows you how to get rich.

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