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2. What is Investment? How to Start Investment Plan?

Portfolio Scenario 2 Example of Investment

Let us understand by above scenario with additional two simple assumptions:

  • You have managed your fund and succeed in acquiring 15% returns year on year.
  • After 20 years, you do not have to pay home loan further. You expenses are reduced by Rs.3,00,000/- (Rs.25,000 * 12 Months) henceforth.
Years Salary Income Cash Savings Cash Y-o-Y 15% Return Net Balance
             1                7,80,000                1,20,000                1,20,000                   18,000          1,38,000
             2                8,58,000                1,45,200                2,65,200                   39,780          1,84,980
             3                9,43,800                1,73,976                4,39,176                   65,876          2,39,852
             4             10,38,180                2,06,770                6,45,946                   96,892          3,03,662
             5             11,41,998                2,44,075                8,90,021               1,33,503          3,77,578
             6             12,56,198                2,86,441              11,76,463               1,76,469          4,62,911
             7             13,81,818                3,34,481              15,10,943               2,26,641          5,61,122
             8             15,19,999                3,88,875              18,99,818               2,84,973          6,73,848
             9             16,71,999                4,50,385              23,50,204               3,52,531          8,02,916
           10             18,39,199                5,19,856              28,70,060               4,30,509          9,50,365
           11             20,23,119                5,98,229              34,68,289               5,20,243        11,18,472
           12             22,25,431                6,86,549              41,54,838               6,23,226        13,09,775
           13             24,47,974                7,85,982              49,40,820               7,41,123        15,27,105
           14             26,92,772                8,97,820              58,38,640               8,75,796        17,73,616
           15             29,62,049              10,23,501              68,62,141             10,29,321        20,52,822
           16             32,58,254              11,64,622              80,26,762             12,04,014        23,68,636
           17             35,84,079              13,22,957              93,49,719             14,02,458        27,25,415
           18             39,42,487              15,00,475          1,08,50,194             16,27,529        31,28,004
           19             43,36,736              16,99,363          1,25,49,557             18,82,434        35,81,796
           20             47,70,409              19,22,046          1,44,71,603             21,70,740        40,92,787
 Net Cash Balance at Retirement Age:    2,83,73,662

Above calculation results are quite joyful:

  • After 20 years you have accumulated around Rs.2,83,73,662/- (approx. around $4,36,517).
  • You have developed the skills to invest the fund and get 15% returns even after post retirement.
  • Considering your fixed expenses are same after retirement and expenses will continue to grow at 8%. It’s an ample amount of money to keep you alive till 21 years post retirement life. Which is good enough to live your life happily even after retirement.

Having figured out, how important is to invest your fund and what kind of returns one should expect by investment to live your life happily even after retirement. Now let us understand 3 things, Why, Where and How to select the asset class that outfit your individual risk and return outlook. Investment assets are characteristics based on risk and return. The following are some of the popular type of investments one should go thru…

  • Fixed income deposits
  • Stock Market
  • Real Estate
  • Commodities (Valuable Metals)

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