Stock investing involves purchasing shares of publicly traded companies, making you a partial owner of those companies. As the company grows and becomes more valuable, your shares increase in value, potentially generating capital gains. Many companies also distribute a portion of their profits to shareholders as dividends.

Stock returns are calculated based on:

• Capital appreciation: (Current price - Purchase price) / Purchase price
• Dividend yield: Annual dividends per share / Price per share
• Total return: Capital appreciation + Dividend yield

Our calculator automates these calculations and accounts for compounding over time.

Historical average returns from stock markets vary by region and time period:

Past performance doesn't guarantee future results, but these averages provide reasonable benchmarks for long-term planning.

Dividends contribute significantly to total returns:

• Provide regular income without selling shares
• Can be reinvested to purchase more shares (compounding)
• Historically, dividends have accounted for about 40% of total stock market returns
• Dividend-paying stocks tend to be less volatile

Our calculator allows you to factor in dividend yield and choose whether to reinvest dividends.

Tax treatment varies by country and holding period:

• Short-term capital gains: Taxed at ordinary income rates (assets held less than 1 year in India)
• Long-term capital gains: Lower tax rates (assets held more than 1 year in India)
• Dividends: Typically taxed as ordinary income
• Tax-loss harvesting: Strategy to offset gains with losses

Our calculator estimates tax liability based on your selected tax rate.

Time horizon is critical in stock investing:

• Short-term (1-3 years): Higher risk due to market volatility
• Medium-term (3-7 years): Reduced risk through compounding
• Long-term (7+ years): Historically lowest risk, highest potential returns

The power of compounding means that longer time horizons significantly increase potential returns. A 10-year investment has much different risk characteristics than a 30-year investment.

Both approaches have advantages:

• Lump sum investing: Historically outperforms dollar-cost averaging about 2/3 of the time
• Dollar-cost averaging (regular investments): Reduces timing risk and emotional investing
• Combination approach: Invest lump sum when available and add regularly

Our calculator allows you to model both initial investments and regular monthly contributions.

Diversification impacts risk and return:

• Reduces company-specific risk
• May slightly reduce potential returns but significantly reduces volatility
• Can be achieved through individual stocks, ETFs, or mutual funds
• Proper diversification includes different sectors, sizes, and geographies

The expected return in our calculator should reflect your diversified portfolio rather than individual high-risk stocks.