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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.

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