Where to Invest for achieving 12% CAGR?

Before continuing I would suggest you read my previous article – What is the need of Investing? After posting that article many of my friends asked, on excel sheet everything seems to be fine but Is there any practical way of getting 12% CAGR? My answer is Yes.

But before telling you final answer let me take a chance to explain all the investment instruments that I know and returns they give. Let me start with the most famous one

Fixed Deposits (F.D)

Fixed deposit is the most famous investment vehicle which is known to many. Most of the people invest here because it gives safe returns on their money. But most of the people don’t know that interest they get through FD is eaten by Inflation.

I am attaching a graph of Inflation from 1984 to 2020 below. Average Inflation of all these years is 8.7%. Interest. The interest rate offered by banks will be almost the same and some times it is way less. That is why I said the interest earned by your FD is eaten up by Inflation.

Inflation graph from 1984 to 2020


Gold is the most favourite investing instrument, especially for Indians. Many People store it in the form of jewellery, but the most effective way of storing gold is through ETF. If you don’t know how to invest in gold online read this article – How to Invest in Gold Online?

Gold Chart
Gold Price chart

Gold provided CAGR of 9% over a period of 25 Years, which is almost similar to Fixed deposits. But gold is negatively correlated to stock markets, what I mean is that during the time of crisis – If stock market plunges gold prices surges.

Real Estate

People treat real estate as a form of business. It involves buying and selling of land. It involves a huge corpus of money. Here I am writing this article for salaried people, so real estate doesn’t belong to our category. So I am ignoring it.

But if one has a huge corpus of money they can consider investing in real estate. Again profits and losses involved in real estate are unrealistic.


Bonds are another form of investment which considered as safest one next to Fixed deposit. The returns which you get through bonds is slightly more than Fixed deposit.

You can usually buy bonds through mutual funds, banks or through your stockbroker. Some of these bonds are open-ended and some are closed-ended. If you don’t know what are open and closed-end mutual funds, read this Closed-End vs. Open-End Investments: What’s the Difference?

Usually these mutual funds in government securities like T-Bills, Sovereign bonds, Corporate bonds etc


Finally here comes the hero of investors i.e., EQUITY. Everyone has a dream of starting a business or a company but due to financial problems very few get a chance. But if you still want to be part of your favourite company, then the only way is through by buying shares of that company through the stock market.

In the stock market, it is possible to make 20% compounded returns by investing in fundamentally strong companies. But to get this kind of Compounded returns one needs strong skills and hard work.

But don’t worry if you are new to investing I have a way for you through which you can grow money at 11 – 12% Compounded Annual Growth Rate (CAGR).

Usually, many people invest in the stock market through Mutual Funds. Every mutual fund has a Fund Manager who usually tries to beat the index. I personally do not like mutual funds because of two reasons

  1. Expense ratio charged by mutual funds is high. This reduces my returns
  2. No matter how intelligent Fund manager your mutual fund has, it is not possible to beat the index all the time.

You might be thinking that ” I am talking about everything starting from FDs to Mutual Funds but not telling about the way to achieve a 12% compounded return”. The main reason for lagging the answer is that investing in the stock market needs patience. If you don’t have patience at least this article till the end how can you patiently hold your portfolio for such long time of 30 Years?

Finally here is my answer – “Invest in Index“. Example of Indices are Nifty 50, Nifty Next 50, Bank Nifty etc., But I usually invest in Nifty 50.

Nifty 50, Nifty Next 50 returns since Inception
Source – NSE India

Nifty 50 started on April 21, 1996. Since then to till June 15, 2017, it gave a return of 12.2%. To invest in nifty you don’t need to be an analyst or you don’t even to be an MBA graduate. Just go and buy a NIFTY ETF like Nifty Bees. Increase the number of Nifty Bees at regular intervals. After that sit back and relax by watching the growth of your portfolio.

In the above compound interest calculator, I added principal amount as Rs.862 because that is where nifty started. Our target is to achieve a 12% compounded growth of our money. From 862 after almost 24 years nifty reached 12440 in 2019 which is more than our target of 12 per cent.

I hope now you got answer for your question – “Where to Invest for achieving 12% CAGR?”. Anyway here is the one line answer – Buy ETF of Nifty increase the quantity in regular intervals and hold it till your retirement ( for a span of 30 years considering you started your career at an age of 25)

One more I need to mention is that market works in cycles that mean, unlike FDs or Bonds you don’t get returns on fixed intervals. You need to wait for a longer period of time and that is why in our last article I set an investing period as 30 Years.

That is it. I hope this article is informative. Thanks for reading.

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