Reverse CAGR Calculator

Plan your financial goals by calculating required investment or returns

Reverse CAGR Calculator

Calculate what you need to achieve your financial targets

Calculation Result

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Reverse CAGR Formulas

Required Return: r = (FV/PV)^(1/n) - 1

Required Investment: PV = FV / (1 + r)^n

Required Time: n = log(FV/PV) / log(1 + r)

Where: PV = Present Value, FV = Future Value, r = Rate, n = Time

Understanding Reverse CAGR

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What is Reverse CAGR?

Reverse CAGR is the process of working backward from your financial goal to determine what you need to achieve it. While regular CAGR tells you the growth rate from a starting point to an ending point, reverse CAGR helps you plan how to reach your target.

Regular CAGR Example: "If I invest ₹1 lakh for 10 years and it becomes ₹3 lakhs, what was my annual return?"

Reverse CAGR Example: "I need ₹30 lakhs in 15 years for my child's education. How much should I invest today at 12% return?"

Key Differences:

Aspect Regular CAGR Reverse CAGR
Purpose Calculate past performance Plan future investments
Inputs Beginning value, ending value, time Any three of: beginning value, ending value, time, rate
Output Growth rate Missing variable to achieve goal
Usage Analysis of past investments Financial planning and goal setting

Practical Applications of Reverse CAGR

Reverse CAGR is incredibly useful for various financial planning scenarios:

Retirement Planning

Calculate how much you need to save monthly to achieve your retirement corpus target based on expected returns.

Education Funding

Determine the initial investment required today to cover future education expenses for your children.

Wealth Target Setting

Find out what annual return you need to achieve to reach your wealth goals within your timeframe.

Investment Strategy

Assess whether your current investment strategy can help you achieve your financial objectives.

How to Use Reverse CAGR Effectively

1. For Required Return Calculation

Use this when you know your initial investment, target amount, and time period, but want to know what return rate you need.

Scenario: You have ₹5 lakhs to invest and need ₹25 lakhs in 12 years for a down payment on a house.

Calculation: Required return = (25,00,000 / 5,00,000)^(1/12) - 1 = 14.87%

Insight: You need investments that can deliver approximately 15% annual returns, which might require equity exposure.

2. For Required Investment Calculation

Use this when you have a specific financial goal, know the timeframe, and have an expected return rate in mind.

Scenario: You want ₹50 lakhs for retirement in 20 years and expect 10% returns.

Calculation: Required investment = 50,00,000 / (1 + 0.10)^20 = ₹7,43,218

Insight: You need to invest approximately ₹7.4 lakhs today to reach your goal.

3. For Required Time Calculation

Use this when you know your current investment, target amount, and expected returns, but want to know how long it will take.

Scenario: You have ₹10 lakhs invested, want ₹1 crore, and expect 12% returns.

Calculation: Required time = log(1,00,00,000 / 10,00,000) / log(1 + 0.12) = 20.3 years

Insight: It will take about 20 years to achieve your goal at 12% returns.

Real-World Scenarios and Calculations

Financial Goal Current Investment Target Amount Time (Years) Required Return Strategy Implication
Child's Education ₹3,00,000 ₹15,00,000 8 22.1% Aggressive equity portfolio needed
Retirement Corpus ₹15,00,000 ₹1,00,00,000 15 14.5% Balanced portfolio with equity tilt
Dream Vacation ₹50,000 ₹3,00,000 3 18.9% Moderate risk investments
House Down Payment ₹5,00,000 ₹20,00,000 5 31.9% Very aggressive strategy or increase investment

Note: Higher required returns generally mean higher risk. If the required return seems too high, consider increasing your investment amount or extending your time horizon.

Strategic Insights from Reverse CAGR

💡 Key Strategic Benefits

  • Reality Check: Helps you understand if your financial goals are realistic
  • Investment Selection: Guides you toward appropriate asset classes based on required returns
  • Course Correction: Identifies when you need to adjust your savings rate or timeline
  • Risk Assessment: Shows the level of risk needed to achieve your goals

Common Patterns and Their Meanings

  • Required return < 8%: Can likely achieve with safe investments like debt funds or FDs
  • Required return 8-12%: Balanced approach with mix of equity and debt
  • Required return 12-18%: Equity-heavy portfolio required
  • Required return > 18%: Very aggressive strategy needed; consider increasing investment or extending timeline

⚠️ Important Considerations

Inflation Impact: Remember that your target amount should be in future value terms, considering inflation.

Return Realism: Be realistic about expected returns. Historical equity returns in India have been around 12-14% long-term.

Tax Implications: Consider post-tax returns in your calculations, as taxes reduce your actual returns.

Regular Monitoring: Review your calculations annually as market conditions and personal circumstances change.

Action Plan Based on Your Results

If Required Return is High

Consider increasing your initial investment, extending your time horizon, or adjusting your financial goal to more realistic levels.

If Required Investment is High

Look for ways to increase your savings rate, consider SIPs instead of lump sum, or explore higher-return investment options.

If Required Time is Long

Start earlier if possible, increase your investment amount, or accept a slightly higher risk profile to potentially reduce the time needed.