16 Nov 2008

Good time to invest

With the Global recession going on, I have thought of investing not for tomorrow but for my post retirement  life! I am beginning to worry if what i have been saving will be over with time as i go on...marriage, children, new home, car, holiday , childrens education and what not?? I believe that i would manage the mid way path, but I am not certain about what and how much amount i will be left with post retirement? Will it be sufficient enough for me to reire or would it be engulfed in my childrens education ... the cost of education will too be increased manifold with time !

So i am in a confusion, what to do.. how much to invest today and till what time? This needs a well calculated risks involved along with it and so are the benefits that i would be reaping post retirement and not now. So there is a big question if i would be able to manage it?  Thats why there is a plan called Systematic Investment Plan (SIP). I need to go right through it in a few days time and do all the calculations till i am in office (say calculations till 60 years of age), and not to forget the TVM (Time Value for Money) in it.

Suppose i invest Rs 1000 only per month till 60 years of age, my savings would be something like this...

Savings at 60 years of age flatly (Present value) = 1000*12* (60 - 26) = Rs 408000/- (pretty good huh!)
Now the TVM factor , say Compounded at 8% for (60-26) i.e. 34 years

Future Value (FV)  = Cash Flow * FVIFA k,n
Cash Flow = 1000*12 =12000
FVIFA k,n = [(1+k)^n -1]/k
k = 8% = 0.08
n = 34

Future Value (FV) = 12000 [ (1+0.08)^34 -1]/0.08

= 12000*158.626  
= Rs 1,903,520 /-

Hence i will be having 19 lacs after 34 years, if i invest every month an amount of Rs 1000 only for 34 years.  So i think you should also go for this type of investment. But please make sure that  you invest the excess amount only and not the basic amount which you have. As the saying which is famous nowadays goes like this.. " Invest when people aree greedy, and be greedy when people invest " by some author i forgot.
Please note that the amount has to be deducted every month for 34 years and its a big commitment from ones side. Hence make sure you are ready for it otherwise it isnt worth  the investment.

Likewise an investment of Rs 4166 per month or Rs 50k per annum can lead you to Rs 79,31,333 after 34 years. Keep calculating :)


1) Be a regular investor
2) Commitment in investments
3) Streamlined perspective of what you are going to get
4) A clear picture of your future demands
5) Doesnt need  very large premium


1) Inflation or recession may affect the rates
2) Amount invested so far will be freezed and can be realised only on maturity
3) If you discontinue the investment, penalty may be attracted depending on the rules of the Bank or type of investment


The calculations shown here are based on the formulas known to us in Finance. The calculations are based on my own thoughts and necessarily do not refelct someones. Please read the instructions or agreement and rules before investing.


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