Skip to main content

LIC vs Stocks

    My Father gifted me a policy when I was is class 10 having policy no 445377**. At the age of 22 I change the portfolio of the investment . Let see what I have found. ( I am not saying that this one is a bed investment at that time. He is a visionary entrepreneur, risk taker, investor and most importantly a great man of humility. In 2015 he planned for next 35 years for his child.)

        Start Date- Oct 2015 

        Closing Date- Oct 2050 

        Term of the Policy- 35 years. 

        Sum maturity amount- 10 lakhs+ Bonus( fully depends on branch) 

        Monthly Payment- 2075+2.25% GST = 2121.68 

        Total Payment in 35 years= 2121.68x12x35= 891105.6 ( 8 lakhs 91 thousand) 

    

    Let we close the policy on 8 Jan 2022. We get 1,08,263/-. We invest in Indian economy. Let say in any index fund which provide 16% annual return in last 30 years. 

    Let consider that in next 30 years index will give 14% return ( Future of Indian is very very bright.) we are considering the minimum return.

Case 1- Calculation for next 29 years. As we show the policy will mature in 2050. So 2050-2022= 28 years( almost 29 years , policy will mature on oct 2050.) and we close the monthly primum of 2,121/-.

    Here we have 

        Years- 29 years 

        Percent Yield- 14% ( considering minimum) 

        Initial Balance- 1,08,263/- 

        Monthly Contribution- 00 

Then our final maturity Balance on 2025- 61,30,690/- in our investment on index. 


Case 2- if we continue our monthly contribution of 2,121/- 

    Here we have 

        Years- 29 years 

        Percent Yield- 14% ( considering minimum) 

        Initial Balance- 1,08,263/- 

        Monthly Contribution- 2121/- 

Then our final maturity Balance on 2025- 1,62,43,817.11/- in our investment on stock.


*Another problem rises in long term investment is Present value of future cash flow. Let say I lend a money 100 to someone and he return the money after one year . He return me 100 but in that year inflation is raised by let say 4%. Then present value of future cash flow is calculated by


Here  
        PV= present value 
        FV= future value 
        r= rate of interest or inflation 
        n= number of year 
In our case in 1 year my 100 rupees become
If he return 100 after two years it become

This type of calculation is applicable to the policies where we get our money after a long periods of time. In our policy we get our money in 35 years later. If inflation is only 4% then we get



This one is the present value of 10lakhs ( bonus are not calculated) that we are going to get in 2050.

So real picture of our investment is here.

Twitter link



Comments

Post a Comment

Popular posts from this blog

External Validation Is Quietly Increasing Stress in Today’s Generation

In today’s generation, many people spend too much time worrying about what others will say. We think about how our lives look on Instagram, how many likes a post gets, and whether we appear successful enough in front of friends, classmates, and even strangers. But the truth is that this constant need for approval only adds pressure and slowly takes away our peace of mind. What matters more is the opinion of people who truly know us, especially our parents and family. Their support and understanding are far more important than the random approval of people who only see our lives from the outside. Still, many of us get trapped in the habit of measuring ourselves through external validation. The more we chase it, the more anxious we become. This pressure does not stop with social media. It reaches into our education, our careers, and even the way we judge ourselves. We start thinking that marks, college names, job titles, and salary define our worth. In reality, this kind of thinking crea...
Post a Comment
Read more

The Psychology Behind Buying Price: A Lesson from Rakesh Jhunjhunwala

I often listen to interviews with people I admire while working out, walking, or whenever I have some free time. I may not always listen to an entire interview, but I usually learn at least one valuable idea from it. Some interviews are so insightful that I listen to them repeatedly. Recently, while listening to an interview with the legendary investor Rakesh Jhunjhunwala, one thought particularly caught my attention: the buying price is extremely important in investing . This idea is not merely about buying at a lower price; it is also about psychology. When I purchase a fundamentally strong business at a sensible valuation, I feel more comfortable during market declines. That comfort helps me think rationally instead of reacting emotionally to every price movement. I experienced this myself. I bought shares of a company at an average price of approximately ₹150. I am not disclosing its name because this article is not a stock recommendation. The price later rose to nearly ₹670 and th...
Post a Comment
Read more

Compounding L to Cr

Initially, the magic of compounding cannot be seen in a small portfolio. It begins to display its magic once it reaches a certain level. All that is necessary for that is penitence, discipline, and an optimistic mind. Many negative factors can come, but being invested in the market can make a great deal of money.      Let's move on to the primary topic. When we reach 10L, we begin to observe its outcome. The rule of 72 states that if we have a 24% compound annual return, we can double our money in 3 years ( To know the rule of 72, click  here   ) . I know that 24% a year is not an easy task for regular people, but it is not impossible. Such a return is easily achievable if someone invests their time and energy and is truly passionate about it.      Let's say on 10L we get a 24% return. Then, after a year, we will get using the compounding formula,           Here, P= 10,00,000/-       ...
Post a Comment
Read more