Decoding Investment Calculator
In a real-time scenario, it is very difficult to determine the exact amount of return that one would receive on investments in UAE. The majority of investment vehicles provide returns after a specific period. As an investor in the UAE, most of us have an approximate figure that we chase to accomplish our financial goals, this is where investment calculator steps in. An investment calculator is a virtual tool that helps willing investors to identify the approximate period and amount of their savings.
The Investment calculator allows investors to calculate a specific parameter for a given investment vehicle or plan. An investment calculator consists of multiple tabs that are a numeric representation of the desired parameter to be found. Investment calculators are simulators that allow individuals to estimate the return on their investments in the UAE. Investment calculators are excellent tools that give potential investors a head up on their investment in the UAE.
Investment calculators calculate returns on investments on the basis of values that are entered by investors. Investors seeking to assess the returns on their investments in the UAE are supposed to enter the initial amount of their investment, frequency of the investment, duration of the investment and expected returns on the investment. The investment calculator is designed to work and calculate returns based on the concept of compounding or compound interest. The concept of compounding applies to some investment vehicles in the UAE.
Variables in an Investment Calculator
Investment calculator calculates returns based on four major variables that are as follows-
The initial investment or principal amount
The initial investment amount is also known as the principal amount is the amount that is allocated at the starting of the investment. For some investment vehicles, the principal amount is quite high and for some investments, the principal amount is significantly lower.
ROI or rate of return
The rate of return or ROI is the most important variable in the investment calculator. The rate of return is the percentage at which the investor would receive investments. ROI is a detrimental factor that helps potential investors to determine and analyze the effectiveness and efficiency of an investment vehicle in the UAE.
Duration of investment
Duration of investment is another vital factor in the investment calculator. Very often investments that lock in principal amount for longer duration are considered to be more prone to higher degrees of risks because of uncertainties that might arise during the course of the investment. Contrary to this longer durations of investments are considered to be more profitable because compounding increases the value of returns and enhances the value of the investment.
Return amount or end amount
Return amount or commonly referred to as end amount is the final amount that an investor receives at the end of their investment in the UAE. It is the most important variable present in the investment calculator as investors make use of an investment calculator to determine the value of return amount they’d receive at the of their investment.
How does Investment Calculator Works?
Potential investors can very easily calculate the end amount by making use of an investment calculator that provides results with high levels of accuracy. Majority of investment calculators that are available online or offline consist of two options i.e. monthly investment calculator and yearly investment calculator.
Investment calculator can be used to calculate returns on investments by the following steps-
- In the first step, investors are supposed to enter their principal amount or the initial amount that they have allocated for investments.
- Once the investor is done with filling in the principal amount the next step is to enter the rate of return (ROI) that they are expecting to get. Typically potential investors might expect an ROI of 8% to 10% furthermore, investors seeking aggressive returns might expect an ROI of 11% TO 13% over the given investment plan in the UAE. 3.
- The next step is to enter the duration of investment in the calculator for which the investment is to be made.
- The last step in using the investment calculator is to fill in the type of currency in which the investment is made because the returns on investments are affected by the type of currency.
- After filling in all the details within the provided fields the investment calculator shows the result i.e. end amount or the return amount.
On the basis of information provided by the investor, the investment calculator calculates the final amount that you will receive at the end of your investment in UAE. The use of an investment calculator can help potential investors to make changes in their investment plans by linking investments to goals in the future.