What is your investing growth rate (CAGR)?

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.

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.

Create a "from start to finish" financial plan with this free robo advisory software template

Free Apps for your Android Phone

Install Financial Freedom App! (Google Play Store)
Install Freefincal Retirement Planner App! (Google Play Store)
Find out if you have enough to say "FU" to your employer (Google Play Store)

About Freefincal

Freefincal has open-source, comprehensive Excel spreadsheets, tools, analysis and unbiased, conflict of interest-free commentary on different aspects of personal finance and investing. If you find the content useful, please consider supporting us by (1) sharing our articles and (2) disabling ad-blockers for our site if you are using one. We do not accept sponsored posts, links or guest posts request from content writers and agencies.

Blog Comment Policy

Your thoughts are vital to the health of this blog and are the driving force behind the analysis and calculators that you see here. We welcome criticism and differing opinions. I will do my very best to respond to all comments asap. 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.

2 thoughts on “What is your investing growth rate (CAGR)?

  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

Do let us know what you think about the article