Financial Planning: Toronto Investment Planning
The basic elements of every successful investment plan include:
Principal + Interest Rate + Time + Taxation = $$$
Principal — The amount of money that your investment starts accumulating interest on or the initial investment.
Interest Rate — The factor by which your principal is affected (+/-) or the gain/loss
Time — The amount of time, usually in years, that you allow your principal to earn interest.
Taxation — There are different tax treatments for different kinds of investments. In general, the taxable portion of your investment will reduce your overall return, and should never be overlooked when making forecasts and assumptions.
Given this formula, if you know any four variables you can determine the fifth.
Ex. If you wanted to accumulate $1 million dollars over 30 years on a tax deferred basis starting with just $10,000.00, then you can calculate that you would need a rate of return of 16.60% annually.
Similarly if you wanted to achieve the same results over 15 years, knowing you could obtain a 16.60% rate of return, then you could compute your principal as $100,000.00.
You can browse the following headings and sub-headings for more information.