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Investing/Strategies / Drip Investing - The Basics


Subject:  Growth Rates Date:  11/6/2001  12:10 AM
Author:  myadidas Number:  21362 of 27990

I am trying to find a formula that will let me calculate what percentage my money will need to grow at to reach my goal at the end of ten years, if I start with a certain amount and keep contributing a set amount to that portfolio for each month over the ten-year period. The only growth rate formulas I know deal with a fixed amount growing to another amount--as far as I know, these formulas don't take into account any money that might be donated to the portfolio along the way.

For example, the Drip Port's goal was to start with $500, contribute $100 each month for 20 years (for a total of $24,500 contributed after 20 years), and have the value of the portfolio grow to $150,000 by the end of that 20 years. But this isn't the same as starting the portfolio with $24,000 and calculating what percentage that amount will need to grow at for 20 years to reach $150,000. Jeff (or whoever wrote the Drip Port introduction) calculated that the portfolio would have to grow by 15.5% each year in order to reach this goal, but what formula was used to calculate this percentage?

If anyone knows a formula I can use to calculate this, or can point me to another message on this board that might help me (I'm sure this question has come up before) I'd appreciate it. Thanks!

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