What is your investing growth rate?

Published: February 9, 2016 at 8:21 am

Last Updated on

Do you know what your investing growth rate is? No, I am not asking about your investment growth rate or CAGR. I am referring to your investing CAGR – the rate at which your investments have increased over a period of time.

When I made my first retirement calculator about 6/7 years ago, the first thing I realized was  the importance of adding the rate at which investments increase as an input. There is a ‘good side’ to this and a ‘bad side’ to this. Which is what I would like to discuss in this post.

The wealth we create is primarily determined by how much we invest.

Here is a comparison of a constant SIP of Rs. 5000 in ICICI Prudential Discovery Fund versus a step-up SIP of Rs. 5000 increasing each year by 10%.


A systematic investment is a simple way to generate a corpus. A systematic increase in the systematic investment helps build a much bigger corpus.

Download the Step-up SIP Calculator  

Download the Step-up SIP Backtesting Simulator

Now here is something even more amazing (at least for a start).

A 30 year requiring 30,000 a month in todays money 25 years later, needs to invest about 50,000 a month to create a retirement corpus

Assumptions: inflation – 8%, equity return =12%, debt return – 8%, post-retirement portfolio return =8%, 25 years in retirement. Chosen just for illustration. You are enter more reasonable inputs here: The low-stress retirement calculator (hopefully!)

Not many people can invest more than they spend and that too just for retirement! So an attractive alteranative is to assume that we can invest more gradually.

Want to know how to reduce fear, doubt and uncertainty while investing for financial goals? Sign up for our lectures on goal-based portfolio management and join our exclusive Facebook Community

For the above inputs, if I assume a 5% increase in investment, the initial monthly investment drops to ~33,500. For a 10% increase, it becomes ~20,500!  Hang on a minute! What is the catch?


For the first 10 years or so, this approach looks better than the constant investment method. After that …! Every ten years or so, the investment amount must be doubled!

So this will work only if income increases at a decent pace and new recurring expenses (lifestyle creep) are manageable.

I have been adopting this approach since 2010-11 – about 10% increase in investment for all financial goals each year. So far I am fortuitous enough to have an investing CAGR better than this 10%, but it has been tough and will continue to remain so.

Someone said that the ‘best vice is advice’, but I will stick my neck out and a jot a few thoughts for young earners to ponder:

  • invest as much as possible when you don’t have expenses related to health (typically that of parents)
  • increase the investment amount as often as possible.
  • If can keep this up for the first 5/6 years of your career,
    • you could with retire early or
    • not be affected if investment decrease due to reasons beyond your control down the line

In other words, make hay while the sun shines.

You can calculate your investing CAGR in the following way

Suppose you invested 15,000 a month, 5 years ago and you are not investing 24,000 a month,

investing CAGR=(24000/15000)^(1/5)-1 ~ 10%

Do give this a try and check if that rate of growth is sufficient for your financial goals.

Do share if you found this useful
Hate ads but would like to support the site? Subscribe to our ad-free newsletter and get beautifully formatted full articles delivered to your inbox!

About the Author

Pattabiraman editor freefincalM. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. since Aug 2006. Connect with him via Twitter or Linkedin Pattabiraman has co-authored two print-books, You can be rich too with goal-based investing (CNBC TV18) and Gamechanger and seven other free e-books on various topics of money management. He is a patron and co-founder of “Fee-only India” an organisation to promote unbiased, commission-free investment advice.
He conducts free money management sessions for corporates and associations on the basis of money management. Previous engagements include World Bank, RBI, BHEL, Asian Paints, Cognizant, Madras Atomic Power Station, Honeywell, Tamil Nadu Investors Association. For speaking engagements write to pattu [at] freefincal [dot] com

About freefincal & its content policy

Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on developments in mutual funds, stocks, investing, retirement and personal finance. We do so without conflict of interest and bias. We operate in a non-profit manner. All revenue is used only for expenses and for the future growth of the site. Follow us on Google News
Freefincal serves more than one million readers a year (2.5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified from credible and knowledgeable sources before publication.Freefincal does not publish any kind of paid articles, promotions or PR, satire or opinions without data. All opinions presented will only be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)

Connect with us on social media

Our Publications

You Can Be Rich Too with Goal-Based Investing

You can be rich too with goal based investingThis book is meant to help you ask the right questions, seek the right answers and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now. It is also available in Kindle format.

Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want

Gamechanger: Forget Start-ups, Join Corporate and Still Live the Rich Life you wantThis book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at low cost! Get it or gift it to a young earner

Your Ultimate Guide to Travel


This is a deep dive analysis into vacation planning, finding cheap flights, budget accommodation, what to do when traveling, how traveling slowly is better financially and psychologically with links to the web pages and hand-holding at every step. Get the pdf for Rs 199 (instant download) 

Free Apps for your Android Phone

Comment Policy

Your thoughts are the driving force behind our work. We welcome criticism and differing opinions.Please do not include hyperlinks or email ids in the comment body. Such comments will be moderated and I reserve the right to delete the entire comment or remove the links before approving them.


  1. Thanks Pattu Sir for this post. I have seen many posts which talk about increasing SIP but none have talked about computing the investment CAGR. This is so insightful. Only thought here is should we actually start putting money in index funds as with increasing SIP, what if we end up increasing stakes in a fund which falters after a few years? Separately, would request you for an article on how to re deploy cash from a fund which is not doing well. Some people say stop SIP but don’t redeem. Others say redeploy in a new fund through STP…Wanted to know what is the impact on wealth creation. I remember in one post you were cautioning against frequent tinkering of portfolios…Thanks Sir

Leave a Reply

Your email address will not be published. Required fields are marked *