Dating with….

DATING WITH MONEY  Part-1 P (1 + R)^n Remember this formula of compound interest, if No, don't worry; we're going to decode it for you Einstein said 'Compound Interest is the greatest force of attraction in the universe ' and We label it your voucher to financial independence. By three easy input can change your life: the amount of money you invest (P) the rate of interest you get (R ) and time you include to allow your money (n ) Let's see how a single Rs 1,000 investment matures over time in 3 savings circumstances. How a lum sum Rs 1000 investment grows     Savings Account BANK FD MARKET PRODUCT* Interest Rate 3.5% 7.5% 10% 5 yrs 1,425 1,723 1,933 10 yrs 1,693 2,473 3,112 15 yrs 2,010 3,551 5,013 20 yrs 2,388 5,097 8,073 25 yrs 2,836 7,318 13,002 30 yrs 3,368 10,506 20,939 35 yrs 4,000 15,083 33,723 40 yrs 4,751 21,653 54,311 *As per the guidelines of SEBI and IRDA Simply investing single time and leaving it 40 years could turn Rs 1,000 into 54 thousand. This is not a magical figure, just what you have done is "earned interest on your interest" that's it !! Okey be sincere Rs 54,311 isn't what it used to be. So let's make one little correction and invest Rs 2,500 every month. Observe compound interest in a frequent manner with 1 more savings circumstances of Recurring Deposit. A more compelling table with Rs 2,500 a month.    SavingsAccount RD BANK FD MARKET PRODUCT Intereset Rate 3.5% 7.5% 9.0% 10% 5 yrs 1,63,665 1,81,318 1,88,560 1,93,593 10 yrs 3,58,581 4,44,826 4,83,786 5,12,112 15 yrs 5,90,715 8,27,781 9,46,014 10,36,176 20 yrs 8,67,173 13,84,327 16,69,717 18,98,422 25 yrs 11,96,419 21,93,152 28,02,805 33,17,084 30 yrs 15,88,532 33,68,614 45,76,859 56,51,220 35 yrs 20,55,516 50,76,905 73,54,461 94,91,595 40 yrs 26,11,667 75,59,555 1,17,03,301 1,58,10,199 Now we're CROREPATI !!!. total investment of 12Lakhs, Awesome, but I know you are thinking, stretching of Rs2500 p.m. for 40 years? Right!! And I also.... Want to know you a Big Secret, keep reading Industry is witness of average growth rate of 15% per year, we have taken 10% as per standards. So to check the flexibility of formula, If we could, let's make small change of investing year to 10, change investment amount to Rs 2000 p.m., at 15% , to get that magical CROREPATI figure. SOME TRICKY WAY TO BE A CROREPATI Regular Investment  MARKET PRODUCT Interest Rate 15% 10 Year regular investment Rs. 2000 p.m. Total Invested Rs. 2,40,000.00 Fund Value After 10 Years Rs 5,50,434.12 Yearly Yield 12.93% FIXED Savings Plan Inputs Interest Rate 15% 21 Year FIXED investment Rs 5,50,434.12 Fund Value After21 Years Rs 1,04,65,350.42 and more over the best part about compound interest is that it works the same for everyone, whether you have Rs 20 to invest or Rs 2,00,000. As a matter of fact, not investing anything in equity-based instruments leaves you exposed to a different and more dangerous risk-that of inflation. It seems to be a matter of deep belief that equity is too risky; The risk in equity is a matter of time. The longer your period of investment, the lower the risk from equity. For sure via equity I suggest equity mutual funds by means of a superior track record. The RIGHT APPROACH would be to try and estimate the actual spending requirements over the next seven to ten years and keep that in fixed income instruments. The remaining amount is your long-term holding and there's every reason to put around half of that in equity. This is probably best done by splitting that amount between two or three Equity, balanced or hybrid funds.