What return should I assume?
7% nominal (or 5% after inflation) is the conservative long-run planning figure for a diversified equity portfolio. Anything above 10% builds fragile projections.
Project what a lump sum plus regular contributions becomes over time, and see how much of the final balance is growth rather than your own money.
FV = P × (1+r)^n + PMT × (((1+r)^n − 1) ÷ r), where r = annual return ÷ periods and n = periods. Real return = (1 + nominal) ÷ (1 + inflation) − 1.
$10,000 upfront plus $500 monthly at 8% for 20 years reaches about $340,000. You contributed $130,000, so roughly $210,000 is compound growth.
7% nominal (or 5% after inflation) is the conservative long-run planning figure for a diversified equity portfolio. Anything above 10% builds fragile projections.
Historically lump-sum investing wins about two-thirds of the time because markets rise more often than they fall, but monthly investing reduces regret risk and matches how income arrives.
Enormously. A 1% annual fee on a 30-year, $500/month plan costs roughly 20% of the final balance — which is why index funds charging under 0.10% dominate long-horizon plans.