Choose a calculation by the question it answers
A calculator applies a formula to inputs. It cannot identify the right investment, predict a security’s return or validate a retirement plan.
| Calculation | What it measures | Main limitation |
|---|---|---|
| CAGR | Annualised growth between a starting and ending value | Does not account for intermediate cash flows or volatility |
| XIRR | A money-weighted annualised return using dated cash flows | Results depend on complete cash flows and dates; some cash-flow patterns have no unique solution |
| Reverse CAGR | The constant growth rate mathematically required to reach a chosen amount | The required rate may be unattainable |
| SIP scenario | Contributions compounded at an assumed rate | Actual investment returns vary and may be negative |
| Withdrawal scenario | Balance changes under assumed growth and withdrawals | Does not establish a safe withdrawal rate or suitable allocation |
Use hypothetical inputs carefully
For example, changing an assumed annual rate from 4% to 8% changes the calculation; it does not show that an investment will earn either rate. Additional contributions can explain a larger ending balance without any improvement in investment performance.
Fees, taxes, inflation, irregular cash flows and losses can materially change results. A simulated outcome is not an observed historical return or a probability verified against future markets.
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