What is your investing growth rate?

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.

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

About the Author M Pattabiraman author of freefincal.comM. Pattabiraman(PhD) is the author and owner of freefincal.com.  He is an associate professor at the Indian Institute of Technology, Madras since Aug 2006. Pattu” as he is popularly known, 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. Pattu publishes unbiased, promotion-free research, analysis and holistic money management advice. Freefincal serves more than one million readers a year (2.5 million page views) with numbers based analysis on topical issues and has more than a 100 free calculators on different aspects of insurance and investment analysis. He conducts free money management sessions for corporates  and associations(see details below). Previous engagements include World Bank, RBI, BHEL, Asian Paints, TamilNadu Investors Association etc. Contact information: freefincal {at} Gmail {dot} com (sponsored posts or paid collaborations will not be entertained)
Want to conduct a sales-free "basics of money management" session in your office?
I conduct free seminars to employees or societies. Only the very basics and getting-started steps are discussed (no scary math):For example: How to define financial goals, how to save tax with a clear goal in mind; How to use a credit card for maximum benefit; When to buy a house; How to start investing; where to invest; how to invest for and after retirement etc. depending on the audience. If you are interested, you can contact me: freefincal [at] Gmail [dot] com. I can do the talk via conferencing software, so there is no cost for your company. If you want me to travel, you need to cover my airfare (I live in Chennai)

Connect with us on social media

Content Policy

Freefincal has original unbiased, conflict-of-interest-free,  topical reports, reviews, commentary and analysis on all aspects of personal finance like mutual funds, stocks, insurance etc. All guest authors and contributors to the site also do not have any conflict of interest. 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. No promotional content We do not accept sponsored posts and link exchange requests from content writers and agencies. This is our privacy policy Our website is non-profit in nature. The revenue from the advertisement will only be used for hosting charges, domain registration charges, specific plugins necessary for traffic growth and analytics services for search engine optimisation.

Do check out my books

You Can Be Rich Too with Goal-Based Investing

You can be rich too with goal based investingMy first 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 WantGamechanger: Forget Start-ups, Join Corporate and Still Live the Rich Life you wantMy second 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

The ultimate guide to travel by Pranav Surya

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

Free Apps for your Android Phone

All calculators from our book, “You can be Rich Too” are now available on Google Play!
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)

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.


  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 *