FitRichSane

2022-05-21 12:31:02 Example 2)


Consider 2 people, A and B.
Person A starts investing Rs.12,000/- per year at the age of 21, stops at 30, but does not withdraw any funds till retirement. In other words, he invests for 10 years, and leaves it alone for 30 years. A total investment of Rs.1,20,000/-
B, on the other hand, starts investing Rs.12,000/- per year at the age of 30, and continues till retirement. So, B invests for 30 years. A total amount of Rs.3,60,000/-.


Person A invested 3 times less than person B, and ended up with a 3-times corpus.

This is the slow, unsexy, steady way to get very rich.
The earlier one understands this magic, the better.


And this, my friends, is why you should avoid credit card debt like the plague (or like Covid-19). The way you make money on investments, you lose equally rapidly as the interest due on credit card payments is compounded every month. Open / Comment

2022-05-21 09:30:04 Open / Comment

2022-05-21 09:30:04 Example 1)
Consider 3 people, A, B, and C, who invest the same amount for their retirements. All 3 of them invest Rs.12,000/- per year for a period of 10 years, i.e. a total of Rs.1,20,000/- each.
The difference is that A started investing at the age of 21, invested for 10 years, and left the amount untouched till retirement after that.
B started investing at the age of 31, invested for 10 years, and again left the amount untouched till retirement.
And again, C started investing at 41, for 10 years, and did not touch the money till 60 years of age.

Intuitively, we might feel that the difference should be nominal as all of them invested the same amount.

But as we see, the final amount that A has is almost 4 times what B does, and B has almost 4 times as much as C.
4 times! The investment of Rs.1,20,000/- becoming over 1.3 crore! And a delay reducing it to less than 10 lakhs!
Here is how their growth curves look. Notice how the graph becomes increasingly steep as time passes. Open / Comment

2022-05-20 15:30:55 I am sure we have all heard that we need to understand Compound Interest to get rich by investing. I am also sure that most of us do not fully appreciate this statement, and that is why we do not act on it.

You need to understand Compound Interest, you really must start believing in it – today. Or it will be too late by the time you start acting on it.
But if you do understand it, these few charts and illustrations are going change your life!

The Power of Compound Interest is just that the interest you have earned starts earning more interest for you. Open / Comment

2022-05-20 12:30:47 This topic is slightly complicated, and it is not even adviced that retail investors should go into the detail.
Let me try to explain the best I can, why experts are suggesting against debt investment for now.

At the base of it, debt investments are loans that companies have taken from you. Since they don't want to deal with individual investors, and you don't want to deal with individual companies, you give these loans via mutual funds.

Now, let's say this mutual fund you have invested in loans an amount to company A.
This company could have taken a loan from the bank at, let's say, 5%, before the RBI repo rate hike.
Now, let's assume the mutual fund gave the loan to this company at 6%. After deducting their charges, this 6% comes to you. You are fully invested here.

Now the rate hike happens.
Company A needs another loan.
Banks say that they won't give this loan for less than 5.5% now.
The mutual fund now gives this new loan at 6.5%.
Because of this, if a new investor wants to buy one of these loans, they'll obviously prefer to buy the new loan. (Yes, loans can be bought and sold. Imagine the new investor paying your entire principal to you and the future loan repayment from company A goes to this new investor now).
Because not many people want to buy your loan, the value of your own declines.
And this is why, in the short-term, RBI repo rate hikes cause problems for people invested in debt funds.

Here's my 2 cents:
We use debt funds for specific goals, rarely for long-term wealth creation. As long as this goal is being fulfilled, it's not very practical for us to keep track of rate hikes, inflation predictions, credit ratings etc.
Invest in good debt funds and achieve your goals.
If you think you can wait for and predict the last rate hike for the near future, your returns will increase by a small percentage.

If we want a very smooth upward graph for our investment, we must stick to FDs, PPF, and at max liquid or overnight debt funds.
If we are going for anything that has the potential for a higher return, we must deal with slight fluctuations and risk.


Hope it makes sense. Open / Comment

2022-05-20 09:30:10 Open / Comment

2022-05-13 15:30:59 Any Marvel/DC followers here? A very offbeat take on investments. Based on Batman


https://www.linkedin.com/posts/thewokesalaryman_batman-retires-ugcPost-6927818398110232576-jj-r Open / Comment

2022-05-13 09:30:05 REITs (Real Estate Investment Trusts) have to distribute 90% of income to investors. Only the rest can be used for expansion.
This income distribution looks like dividend/rent to many investors, and we end up investing for this reason.
Always invest for the underlying asset, never for the short-term return you think you will get.
REITs make sense only if you believe Real Estate will go up. No other reason Open / Comment

2022-05-13 06:30:07 A glass of water first thing in the morning can prevent many diseases Open / Comment

2022-05-12 15:30:50 Emergencies can strike everyone.
Everyone will retire one day and face decades where they don't earn.

Genuine question for everyone here:
If you are not investing, what is your emergency/retirement plan? Open / Comment