Mutual Funds
Introduction
Mutual funds are the pool of money that is collected by the company from the Investors who are willing to Invest and the money collected is invested in Stocks, bonds, Money market Instruments & other Instruments by a Professional.
So the money is collected and invested as per the advice of Professional Money Manager or an Expert who has knowledge about the market.
The Income generated from the Investment is generally distributed proportionately amongst the investors after deducting certain expenses.
Mutual funds are Good to invest if you don’t want the headache of managing your money or you don’t have the knowledge of Investment but you want to grow your money then mutual funds are the best. The funds are managed by the professional who, does it all for you at relatively low charges.
There is also a Scheme Called S.I.P Investment. There are different types of Shares and Investment plans lets not get into it.
What is S.I.P?
S.I.P is a small Investment on recurring basis say monthly or quarterly.
Here is a simple calculation to show you the power of compounding using S.I.P investment
According to the Analysis The average Rise in the market is 14-20% every year which might be less or equal sometimes but in long run will be equal to or more than that.
Lets take 16% as an Average returns rate on the SIP
E g :- 2000 INR or (30$) a Month for a Period of 30 Years at rate of @16 % will be
• Total Investment = `7,20,000.00
• Total Earning = 1,77,40,951.63 INR (1.77 Cr)
• Time Period = 30 Years (360 months)
The amount of investment is comparatively low & Return Are Huge in Long run.
This calculation is done on average basis despite of any market boom and crash.
If you start it at the Age of 20 you will receive the amount by the age of 50
You can choose The investment amount and the number of year according to the amount you expect in Future.
There are various SIP calculator on internet you can use them to calculate the future value of Investment
Now you have 1,77, 40,951.63 INR
Say Half of the money you kept in two different banks that is 8870475.5 INR each
One is for spending it for the next 8 Years & rest you invested for 8 years that is 96 Months Around 92k a month in S.I.P @15% interest as its for comparatively shorter term so we take 15% over here plus the whole amount is in two different bank accounts on which you will be also getting 4-5% of Interest annually
The bank account that is 8870475.5 INR for your expenses for next 8 years till the amount is growing in S.I.P so if you divide 8870475 from 96 months you can spend 92400 around 92k a month plus the amount you will have in bank account you will get around 4% - 5% rate of Interest annually and what can you do is half this amount too that is 8870475 INR that is equal to 4435237 and FIX deposit this amount for 4 Years on which you will get around 8-10% Interest on FD deposit until the maturity you can spend 4435237 that is 92k a month after 4 years you will receive the FD investment that you have invested in FD just because you wanted a safe Investment on the maturity amount will be Rs. 60,34,091 (60 lacs)
Now after 4 Years your expenditure per month has increased to 1 Lac a Monthly considering the inflation and tax rates
So 1 lac a month for next 4 Years that is 48 months is equal to 48 lacs you still have 20 lacs left which you could invest again in Share market or mutual funds if you want so after 4 years after spending 1 lac a month you have reached to the time of you S.I.P maturity which you were investing 92k a month in S.I.P @15% for 8 years that is 96 months the amount at maturity will be
`Rs 1,71,06,164.68
Your Investment = 88,32,000.00
Your Earning = 82,74,164.68
Total = Rs 1,71,06,164.68
+ 2000000 *(20 lacs)
______________________
19106164.68 (1.9cr)
_____________________
*+ 2000000 (that was left with you)
You can now Plan Next 8 Years Again with the same technique and can Live a free letting your money work for you.
We have not calculated any Saving Bank interest + No market boom
In case of market boom you will achieve the target before the fixed time
This is how you can grow your money and live even if you are not Earning a penny from your Job or business after 50 of your age
Just because SIP is easy and you don’t have to worry about managing your money if you have a good financial planner or you know even a little about stock market you can simply choose to invest in a particular stock or buy shares of a particular company ,that can get you good returns so that you don’t need to invest in SIP after the age of 50 and the figures will go up & up .
CONTENT CREDIT : Original Content Written by me
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