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  • Power of Compounding by Naren

    Enviado por

    hrdpro
    11 visualizações2 páginas
    Annual rate of return Equity Mutual Funds 9% Shares and Mutual Funds 18% Returns from PPF, FD, etc. Is assumed to be at 9%, a level even higer than the current 8%. Further we assume that Indian corporates grow at 3% pa faster than GDP + Assumptions made for these inflation, ie @ 16% pa.

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    Annual rate of return Equity Mutual Funds 9% Shares and Mutual Funds 18% Returns from PPF, FD, etc. Is assumed to be at 9%, a level even higer than the current 8%. Further we assume that Indian corporates grow at 3% pa faster than GDP + Assumptions made for these inflation, ie @ 16% pa.

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    Attribution Non-Commercial (BY-NC)
    Baixe no formato PDF, TXT ou leia online no Scribd
    Sinalizar o conteúdo como inadequado
    11 visualizações2 páginas

    Power of Compounding by Naren

    Enviado por

    hrdpro
    Annual rate of return Equity Mutual Funds 9% Shares and Mutual Funds 18% Returns from PPF, FD, etc. Is assumed to be at 9%, a level even higer than the current 8%. Further we assume that Indian corporates grow at 3% pa faster than GDP + Assumptions made for these inflation, ie @ 16% pa.

    Direitos autorais:

    Attribution Non-Commercial (BY-NC)
    Baixe no formato PDF, TXT ou leia online no Scribd
    Sinalizar o conteúdo como inadequado
    de 2

    Magic of Compounding

    PPF, FD, etc.

    Description
    Annual rate of return

    9%

    9%

    9%

    Equity Mutual Funds


    9%

    18%

    18%

    18%

    Shares and Mutual Funds


    18%

    21%

    21%

    21%

    21%

    Returns from PPF, FD, etc. is assumed to be at 9%, a level even higer than the current 8%, so as to
    intentionally understate the outperformance of risky assets. We also assume that India grows @ 7% pa,
    Inflation to be at 6% pa. Further we assume that Indian corporates grow at 3% pa faster than GDP +
    Assumptions made for these Inflation, ie @ 16% pa. Listed corporates outperform other corporates by 2% pa, ie @ 18% pa. We assume
    that mutual funds outperform this nominal growth of 18% pa by just 1% to fetch a return of 19% pa. Finally,
    projections
    we assume that active investors investing in shares and mutual funds get an additional return of just 3% pa
    more than mutual funds, ie., 22% pa. Finally, to inject a further conservative bias into our projections, we
    reduce the return on "risky" assets by 1% pa, arriving at the above figures of 18% and 21% per annum.
    No. of Years
    No. of Monthly Instalments
    over the entire period
    Monthly investment during
    the investment period

    Principal Amount Invested (in


    thousands of rupees)

    10

    15

    20

    10

    15

    20

    10

    15

    20

    60

    120

    180

    240

    60

    120

    180

    240

    60

    120

    180

    240

    500
    1000
    5000
    10000

    500
    1000
    5000
    10000

    500
    1000
    5000
    10000

    500
    1000
    5000
    10000

    500
    1000
    5000
    10000

    500
    1000
    5000
    10000

    500
    1000
    5000
    10000

    500
    1000
    5000
    10000

    500
    1000
    5000
    10000

    500
    1000
    5000
    10000

    500
    1000
    5000
    10000

    500
    1000
    5000
    10000

    30
    60
    300
    600

    60
    120
    600
    1200

    90
    180
    900
    1,800

    120
    240
    1,200
    2400

    30
    60
    300
    600

    60
    120
    600
    1200

    90
    180
    900
    1800

    120
    240
    1200
    2400

    30
    60
    300
    600

    60
    120
    600
    1200

    90
    180
    900
    1800

    120
    240
    1200
    2400

    Please move on to the next page to see the real magic of compounding!

    Description
    Annual rate of return
    No. of Years

    9%
    5

    Magic of Compounding
    PPF, FD, etc.
    Equity Mutual Funds
    9%
    9%
    9%
    18%
    18%
    18%
    18%
    10
    15
    20
    5
    10
    15
    20

    Shares and Mutual Funds


    21%
    21%
    21%
    21%
    5
    10
    15
    20

    Principal Amount Invested (in


    thousands of rupees)

    30
    60
    300
    600

    60
    120
    600
    1200

    90
    180
    900
    1800

    120
    240
    1200
    2400

    30
    60
    300
    600

    60
    120
    600
    1200

    90
    180
    900
    1800

    120
    240
    1200
    2400

    30
    60
    300
    600

    60
    120
    600
    1200

    90
    180
    900
    1800

    120
    240
    1200
    2400

    Cumulative value of investing


    Rs. 500/= per month (in
    thousands of rupees)

    38

    97

    189

    334

    48

    166

    453

    1,154

    52

    201

    620

    1,809

    Cumulative value of Rs.


    1000/= per month (in
    75
    194
    378
    668
    96
    331
    906 2,309
    105
    401 1,241 3,618
    thousands of rupees)
    Cumulative value of Rs.
    5000/= per month (in
    377
    968 1,892 3,339
    481 1,656 4,528 11,544
    523 2,005 6,203 18,088
    thousands of rupees)
    Cumulative value of Rs.
    10000/= per month (in
    754 1,935 3,784 6,679
    962 3,313 9,056 23,089 1,047 4,011 12,405 36,176
    thousands of rupees)
    The above calculations are indicative. Hopefully, I've made no calculation goof-ups. Even if I have, the general trend remains
    valid.

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