A couple of weeks back I had written about an unhealthy concoction of investment products. After reading it one of the readers sent me a couple of queries on a popular messaging platform.
After carefully going through his queries and answers, here are my inputs....
1. I fully agree to his view that I need to make an apple to apple comparison, and the shortfall (27 years hence) is just Rs. 3 lakhs, but imagine that time in future when you will fall short of that same 3 lakhs for your child's wedding/ buying your dream car/house and you have to avail a loan for that purpose even after very well knowing that you could have achieved it easily by avoiding the 'khatkhatem' product.
2. I do not agree to his premise about the hassles of multiple products, as you can easily set up a direct debit (ECS mandate) in your bank account for the specified tenure for both the products, remember this needs to be done only once and the future debits will take place automatically.
3. I also differ from his view that most Indians would never psychologically invest in a term plan, as this article states that sales of online term plans are rising by 40%.
4. It is also important to note that, where pension income receive from insurance companies is taxable, withdrawals from PPF are totally tax free.
While it is great to see that my readers are financially literate (not taking the things I write for granted) and are aware of what is going on, this time I would like to build another perspective, and yes it must include Mutual Funds (what else).
I have talked about tax saving Mutual Funds (ELSS) earlier too but let us put them to use now by preparing a Retirement Plan for the same friend I was talking about a couple of weeks back.
I have assumed that he is going to invest the same amount of Rs. 61,000/-(70,000 less term insurance premium) per year only on a monthly basis.
So, the investment per month is of Rs. 5,080/-
Let us now assume that in the next 27 yrs we will achieve only half the returns.
So 15% (approx)
Investment amount
= Rs 5,080 x 12(months) x 27(yrs)
= Rs. 16.45lacs(approx)
Value after 27 years @ 15%
= Rs. 1.86 crores
It is clearly seen that even after applying probability of risk(50%) this investment is still worthwhile and generates better wealth in the long term.
So what are you waiting for.... start a SIP in Tax saving mutual funds today.......
Don't forget to download the friday financials app on android
Disclaimer : Funds are used for depicting long term performance and should not be construed as advice for investment.
Image source Valueresearch online
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