Ramit Sethi Investment Calculator

Ramit Sethi's Investment Growth Calculator

Project your wealth using Ramit Sethi's principles of consistent, automated investing.

Understanding Ramit Sethi's Investment Philosophy

Ramit Sethi, author of "I Will Teach You To Be Rich," advocates for a straightforward, automated, and effective approach to personal finance and investing. His core philosophy centers on setting up systems that work for you, allowing you to grow your wealth without constant manual intervention. This calculator helps you visualize the power of these principles.

Key Principles:

  • Automate Everything: Ramit stresses the importance of automating your savings and investments. By setting up automatic transfers from your checking account to your investment accounts, you ensure consistent contributions, removing the need for willpower and making sure you "pay yourself first."
  • Invest in Low-Cost Index Funds: Instead of trying to pick individual stocks, Ramit recommends investing in diversified, low-cost index funds or ETFs. These funds track broad market indexes (like the S&P 500), offer broad diversification, and typically outperform actively managed funds over the long term due to their minimal fees.
  • Focus on the Long Term: Investing is a marathon, not a sprint. Ramit emphasizes the power of compounding over decades. Consistent contributions, even small ones, combined with market growth over a long investment horizon, can lead to substantial wealth accumulation.
  • Optimize Your Big Wins: While daily budgeting can be tedious, Ramit suggests focusing on "Big Wins" – optimizing your major expenses like housing, cars, and debt, and then automating your savings and investments. This frees up mental energy and ensures your money is working hard for you.

How This Calculator Works:

This calculator projects your future investment portfolio value based on your current investments, your consistent monthly contributions, an expected annual growth rate, and your investment horizon. It demonstrates the combined effect of your initial capital growing over time (future value of a lump sum) and your regular contributions compounding (future value of an annuity).

The "Expected Annual Growth Rate" is a crucial input. While past performance doesn't guarantee future results, a diversified portfolio of index funds has historically returned an average of 7-10% annually over long periods, adjusted for inflation. Ramit often uses a conservative 7-8% for planning purposes.

By adjusting the inputs, you can see how increasing your monthly contribution, extending your investment horizon, or even slightly improving your growth rate can dramatically impact your projected wealth. This tool is designed to empower you to make informed decisions and stick to your automated investment plan, just as Ramit Sethi teaches.

function calculateInvestmentGrowth() { var currentPortfolioValue = parseFloat(document.getElementById('currentPortfolioValue').value); var monthlyContribution = parseFloat(document.getElementById('monthlyContribution').value); var annualGrowthRate = parseFloat(document.getElementById('annualGrowthRate').value); var investmentHorizon = parseFloat(document.getElementById('investmentHorizon').value); var resultDiv = document.getElementById('result'); if (isNaN(currentPortfolioValue) || isNaN(monthlyContribution) || isNaN(annualGrowthRate) || isNaN(investmentHorizon) || currentPortfolioValue < 0 || monthlyContribution < 0 || annualGrowthRate < 0 || investmentHorizon <= 0) { resultDiv.innerHTML = "Please enter valid positive numbers for all fields."; return; } var r_annual = annualGrowthRate / 100; // Convert annual rate to an effective monthly rate for monthly compounding // r_monthly = (1 + r_annual)^(1/12) – 1 var r_monthly = Math.pow((1 + r_annual), (1/12)) – 1; var n_months = investmentHorizon * 12; var futureValueLumpSum = currentPortfolioValue * Math.pow((1 + r_monthly), n_months); var futureValueAnnuity = 0; if (r_monthly === 0) { // Handle zero growth rate for annuity futureValueAnnuity = monthlyContribution * n_months; } else { futureValueAnnuity = monthlyContribution * ((Math.pow((1 + r_monthly), n_months) – 1) / r_monthly); } var totalFutureValue = futureValueLumpSum + futureValueAnnuity; resultDiv.innerHTML = "Your Projected Investment Portfolio Value: $" + totalFutureValue.toLocaleString('en-US', { minimumFractionDigits: 2, maximumFractionDigits: 2 }) + ""; } // Calculate on page load with default values window.onload = calculateInvestmentGrowth;

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