CAGR in Nepal: How to Calculate Compound Annual Growth Rate for NEPSE, Gold & Land
Official Rule & Calculation Summary: CAGR in Nepal: How to Calculate Compound Annual Growth Rate for NEPSE, Gold & Land
Direct Answer: Master the Compound Annual Growth Rate (CAGR) formula and Rule of 72 to compare multi-year investment returns across NEPSE equities, mutual funds, FENEGOSIDA gold, and real estate in Nepal.
Compound Annual Growth Rate (CAGR) measures the true annualized compounding return of an investment between its starting value and ending value over multiple years. The exact mathematical formula is: CAGR = [(Ending Value ÷ Beginning Value)^(1 ÷ Number of Years)] - 1. Unlike simple average return percentages, CAGR accounts for compounding volatility and lets Nepali investors compare commercial bank Fixed Deposits (FD), FENEGOSIDA gold prices, Ropani/Bigha land appreciation, and NEPSE stock portfolios on an equal footing.
- Exact Formula: CAGR = (Ending Value / Beginning Value)^(1 / n) - 1, expressed as an annual percentage.
- Rule of 72 Shortcut: Divide 72 by your annual CAGR % to find the exact number of years required to double your money (e.g., at 12% CAGR, money doubles in 6 years).
- Inflation Benchmark: Any asset in Nepal must generate a post-tax CAGR above the Nepal Rastra Bank (NRB) average CPI inflation rate (~6.5%) to build real purchasing power.
- 10-Year Nepal Asset Benchmarks: Gold in NPR has compounded at ~13.5%–15% CAGR, beating average commercial bank Fixed Deposits after 5% TDS.
1. Comparing 10-Year Historical CAGR of Major Asset Classes in Nepal
Evaluating where to allocate capital in Nepal requires comparing annualized compounding rates against risk and liquidity:
| Asset Class in Nepal | Typical Historical CAGR (%) | Years to Double (Rule of 72) | Taxation on Gains |
|---|---|---|---|
| Commercial Bank Fixed Deposit (FD) | 7.0% – 9.5% p.a. | 7.6 – 10.2 Years | 6% Final Withholding TDS |
| Open-Ended Mutual Fund SIP (SEBON) | 11.5% – 14.5% p.a. | 5.0 – 6.2 Years | 5% TDS on Dividends / 5% Long-Term CGT |
| 24K Fine Gold (FENEGOSIDA NPR Rate) | 13.5% – 15.2% p.a. | 4.7 – 5.3 Years | 2% Luxury Tax (>10 Lakh) / CGT if applicable |
| Urban Residential Land (Valley / Highway) | 14.0% – 18.0% p.a. | 4.0 – 5.1 Years | 5% (>5 yrs) or 7.5% (<5 yrs) Malpot CGT |
2. Worked Example: Calculating 5-Year Land or Stock Portfolio CAGR
If you invested NPR 1,00,000 in a NEPSE equity portfolio or mutual fund 5 years ago and its current market value is NPR 2,65,000: Total Absolute Return is 165%, and CAGR = (265,000 / 100,000)^(1/5) - 1 = (2.65)^(0.20) - 1 = 21.52% compounded annually. By the Rule of 72 (72 ÷ 21.52), a portfolio growing at this pace doubles every 3.35 years.
Final Thoughts
Looking solely at total profit percentages without factoring in holding duration misleads investors. Calculate your portfolio’s true annualized CAGR and doubling horizon using our free CAGR Calculator.
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