This is a Video post by me , where I have tried to teach some basic formula’s for starters who should know important calculations using which they can calculate important stuff like Maturity value of Investment when they make SIP payments , or one time payments .
I am getting some questions like “I want to invest 2k per month for 10 yrs in mutual funds , Can i generate 20 lacs” type of questions . Seems like many readers do not know how to apply and use simple formula’s to calculate these stuff when they calculate how to generate wealth for long term . Often you might have felt that you have to depend on others for calculations , because you don’t know it themselves .
I have made a video myself where I explain 3 important formula’s which everybody should know .
1. Compound Interest
2. Annuity
3. CAGR
Lot of you might have learned this school , but many have forgotten it . So in this video post I have explained it with examples . I hope that it will help beginners or new readers . I am also giving a Calculator below the video where you can do your own calculations , If it gives any error , please go to the link I provide and calculate it there . I will also put presentation here , so that people who have very low bandwidth can view the presentation at least .
Presentation
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{ 23 comments… read them below or add one }
your website is really very informative and eyeopening to me. my current expenses in total are 40000.i can save upto 30000/month. for retirement i need around 4 cr at age of 60.but i m unable to make saving in proportion of my retirement requirement.my current age is 31.i had lic of 22 lacs.one is jeevan anand(12 lac) and other is jeevan sathi(10 lac).i m having ppf account since 4 years. but it wont be sufficient after 30 years at 8 % interest.i m interested to know how should i divide my savings so that my retirement corpus will be 4cr.and also i have one son .for his education also i want to save.
Prashant ,, If your expenses are 40k per month , then your retirement corpus comes exactly 4 crores
. For that you have to invest 13k per month for next 29 yrs and have to get 12% return , this is easy 
, only thing which you need to give is your commitment and discipline . You can divide this like this
Invest 10k into 3-4 diversified equity funds through SIP
Invest 3k in PPF per month .
As you start getting close to your retirement , make sure you start decreasing your Equity allocation and increase your Debt Allocation .
You also need to plan for your Child education like this . Find out how much you need , Find out how much you need to save per month and then make sure most of it goes to Equity as its a long term goal .
Reply if you need more detailed explaination .
Manish
Thak you for those great blogs, i ahve learned so many things and starting toplan my finance now. I am 34 years old, My monthly income is 40000, and have a total loan of 400000.. I have Jeevan anand of 5 lacs with primum 11000(half yearly) and 1 lac jeevan sathi (3000 half yearly), I have DSP black rock (2000/pm), reliance tax saver (1000/pm), reliance growth (1000/pm), sbi magnum tax gain (1000/m), I want to take a term insurance and more over I am feeling guilty by taking endowmwnt plans from LIC after reading your blogs. The term insurances are just one and half year old. should I stop these and take large term insurance. what should i do. please reply
Prasanta Kumar das
You better take sufficient cover using term insurance and try to surrender those Endowment policies .
Manish
Manish,
What is your opinion about the various Pension schemes currently available in the market? Can we entirely rely upon them for the retirement planning?
An agent from a notable investment company presented a projected sheet where he calculated the returns assuming 12% yearly interest. The final amount calculated on this basis was fairly impressive. But later on as I was going through the yearly returns of some of the available Pension funds, I found that the actual yearly returns were quite lower in most of the cases (even as low as 4% in a particular year). I dont have much knowledge in this field and I’m not very good in these calculations either, so I am seeking your help. Could you please shed some light on this?
P.Mallick
P Mallick
You should have asked him following questions
1. What is the allocation of assets they are going to invest in ? Debt Vs Equity ?
2. How much is guaranteed ?
3. Is this a ULPP product ? If yes ,then its same like ULIP .
The problem with any pension product is that the moment you take it , its are bind with them, the amount you get at maturity , onyl 1/3 of that will be provided lumpsum and rest will be used as pension .
You can do all your investment yourself using SIP , PPF , ETF’s and at the end use the money to buy some annuity (Product which gives you pension) .
12% is a good return and pretty much acheivable .. but for that you dont need anyone help .. Without much help and time , you can acheive this , but you need extreme amount of dicsipline .
Start investing in PPF (30%) and in SIP in mutual funds (70%) . Keep doing this for years and at the end , you will end up with more than 12% (with that small risk of equity)
manish
Manish, I have become a great fan of yours in just 10 days. Recently one of my LIC policy matured and thats when I started realising that I haven’t invested much and am feeling very guilty. Right now I have 3 LIC policies worth 3 lacs, SIP in SBI MF Contra Divident of 5k per month and 2 PPF which I started in my daughters names with 70k each. Apart from this 2 reliance Policies with an annual premium of 25k and 30k respectively for which the premium paying period is 10 years. Just wanted to know that for my children’s education and for a peaceful retired life how much should i invest. Am 37 years old and my kids r of 10 & 7 years old. i earn around 40k per month and my wife earns around 30k. we hav a housing loan of 18lacs (pending) and car loan of 3 lacs as liability. our monthly expense apart from our liability including fuel is around 15k. kindly guide.
Viju
You should rather get out of your ULIP’s and Endowments and start building portfolio using MF , ETF and other tools , for child education refer to : http://www.jagoinvestor.com/2010/01/5-easy-steps-to-do-your-childs-education-planning.html
Manish
Manish
I can say with certainity that I have read almost all ur articles by now including the one suggested by u here. I have another query. All my investmens including the ULIP’s are for long term. If quity is doing well on long term, why not switch 100% of my units into equity than balancing with equity and debt??!!! Hope am not wrong in my understanding!!! Kindly clarify. Trust me, I must have suggested a lot of my friends about ur Blog, its really informative and useful and pretty simple as well.. Keep going….
Viju
the problem is you cant time the market .. you will make mistakes and once you move everything to equity .. it can fall back .
Manish
Hi Manish,
I’m wonderng if you could enlighen us on the different charges incured in MFs. I’m read few articles on this what I understood that per SEBI, currently no charges on MFs. I’m wondering how MF indutry will run if no charges. Are there any hidden charges not known to investor.
Also would like to get ur view on ICICI prulife ACE ULIP. This seems to be very low cost ULIP as per my analysis. I’m thinking seriously to take this 1.
Thx for valuable advice as u always provide.
Regards, Govind
Hi manish,
I have became fan of yours within a short period of time,Manish I would like to have the calculater/formula to calculate the “rate of return” in case of mutual fund SIP.
Thanks a lot in advance.
kalpesh
Kalpesh
You should rather use the normal SIP calculator and see at what percentage it satisfies , you have to do back testing , or use IRR .
Manish
I had taken jeevan saral policy with 400pm age 19.will i get around 1lac,7 after 10years,15year or they are making fool.
Jigar
LIC never makes people fool as a company , its only agents who missell . Another thing is that there is never a fixed sum assured . its always Sum assured + Bonus which you get , if agent gave you some figure it would be based on some assumptions only . So check out your policy details .
Manish
awesome
Thanks for liking it .. what else can be improved in this ? I know its more better quality , but I am human and I am learning
Manish
This one is great article. Almost all of us learn these formulas in Colleges and then forget it. Thanks for puting it here. Its helping me plan my investments clearly.
Great job Manish.
Regards
Shobha
Shobha
Thanks
. Keep watching and spreading the message
Hey Manish,
Thanks. Very informative and kind of a refresher for me. Been out of finance for some time and this sort of helped…
Please keep up the good work…
Best Regards, Prajacta
Prajacta
Good to know that you are getting in touch with finance once again , but this one is personal finance
Dear sanjay
I am confused now a days please help me. i m working with a bank as scale I & getting 27000/m (under old pension scheme). Now i have selected in another bank as Scale-ii 32000/m (new pension scheme). for long term benefit (approx 30 yr) weather i should continue or join new job? i am not much aware about new pension scheme. please reply soon.
Naveen
I am sure that the pension account would be transferrable ., right ?
Manish