What factor primarily affects the future value of an investment?

The rate of return is the primary factor that affects the future value of an investment because it determines how much the investment will grow over time. The rate of return reflects the earnings generated by the investment, whether it comes from interest, dividends, or appreciation of asset values. A higher rate of return will generally lead to a significantly greater future value, compounding the growth over the investment period.

While the amount spent on the investment and the initial amount of money invested are important, they are not the sole determinants of future value. Both of these factors establish the baseline for how much is being invested, but without a favorable rate of return, the growth potential is limited.

The duration of the investment also plays a role in determining future value, particularly in terms of compound interest. However, the effectiveness of compounding over time is largely contingent upon the rate of return; therefore, it is ultimately the rate of return that has the most significant impact on the future value of the investment. In summary, the rate of return directly influences how effectively an investment grows and the wealth accumulated over time.