My Life, My Decisions
                                                 (A Life Time Decision)

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The future depends on how we plan the present.If the planning and decisions are right, the future is definitely good.             ...A renowned Economist.



Saving is income not spent, or deferred consumption. Experts suggest, that for every individual saving is necessary. Savings come handy during rainy days or bad times. It also helps in your retirement planning. It is said that saving must start from the day, one starts earning. But, the general belief is, earlier the better.
Methods of saving include putting money aside , for example,

                                           

MyLifeMyDecisions in partnership with various Banks and financial institutions are facilitating the users/customers to invest/save in various schemes being offered by these institutions. The presentation below gives an idea about the future values your investment/savings will generate.




Fixed-Deposit:

Interest on Fixed Deposit is the amount paid based on the principal amount. Here is an example, how the calculation is done.



Calculation of Interest on F.D. (For 1 year or 12 months)
Amount Deposited 1,00,000
Period of Deposit in Months 12
Interest Rate 9%
Total Interest 9000
Less (TDS@10%) 8100
Net Amount 108100

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Compound-Interest:

Compound interest arises when interest is added to the principal so that from that moment on, the interest that has been added also itself earns interest. This addition of interest to the principal is called compounding. The following formula gives you the total amount one will get if compounding is done:-



                                             Where

Here is an example, how the calculation is done.

Calculation of Compound Interest (For 3 years)

Amount Deposited 1,00,000
Period of Deposit in Years 3
Interest Rate 9%
Calculate 29503
Less (TDS@10%) 2950
Net Amount 126553

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Recurring Deposit:

Recurring Deposit is another method of saving in the bank or post office.The amount the depositor decides has to be deposited in the bank or post office on a monthly basis for the tenure , he/she decides. One can calculate the amount he has deposited over the tenure and the final amount that will be available on maturity.


Annuity:

An annuity is an agreement between an individual and the financial institution where a one time/ lump sum payment or series of payments(regular instalments) are paid by the individual and in return obtain regular disbursements beginning either immediately or at the time of maturity. Example:

Here is an example, how the calculation is done.

Calculation of Annuity Amount (PPF For 15 years)
Year Amount of Deposit New Principal Interest Rate Interest Earned Balance
2014 1,00,000 1,00,000 8.70% 8,700 1,08,700
2015 1,00,000 1,08,700 8.70% 18,157 2,26,857
2016 1,00,000 2,26,857 8.70% 28,437 3,55,293
2017 1,00,000 3,55,293 8.70% 39,611 4,94,904
2018 1,00,000 4,94,904 8.70% 51,757 6,46,661
2019 1,00,000 6,46,661 8.70% 64,959 8,11,620
2020 1,00,000 8,11,620 8.70% 79,311 9,90,931
2021 1,00,000 9,90,931 8.70% 94,911 11,85,842
2022 1,00,000 11,85,842 8.70% 1,11,868 13,97,710
2023 1,00,000 13,97,710 8.70% 1,30,301 16,20,011
2024 1,00,000 16,20,011 8.70% 1,50,337 18,78,348
2025 1,00,000 18,78,348 8.70% 1,72,116 21,50,464
2026 1,00,000 21,50,464 8.70% 1,95,790 24,46,255
2027 1,00,000 24,46,255 8.70% 2,21,524 27,67,779
2028 1,00,000 27,67,779 8.70% 2,49,497 31,17,276

Your Total Investment (A) 15,00,000
Interest Earnings (B) 16,17,276
Total Amount (A+B) 31,17,276

Similarly , other such investments/savings can be calculated. The formula is same only you have to enter the amount and the tenure

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CAGR - Compound Annual Growth Rate

This is very useful instrument. In this , one can calculate how the money is growing on yearly basis (in a geometric progression). This provides a constant rate of return over the tenure. The compounded annual growth rate is calculated by taking the nth root of the total percentage growth rate, where n is the number of years in the period being considered.It is:

The formula used for calculation is:

Here is an example, how the calculation is done.

Calculation of CAGR
Beginning Amount Ending Amount No.of Years(n) C=Ending Amount/Beginning Amount D=1/n E= Tenure (C^D) F(CAGR)= E(Tenure)-1 G(%Age of F)i.e. F*100
50,000 1,00,000 4 2 0.25 1.1892 0.1892 18.92%


One can calculate two CAGRs on two different investment to decide which investment gives better CAGR and take hs decision.

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Share,Stock market or equity market is the aggregation of buyers and sellers of shares/stocks. These may include securities listed on a stock exchange as well as those only traded privately. The share market is highly unpredictable as such the gain/loss is also unpredicted. It is upto the individual/ investor to decide which share he should buy or sell.


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Mutual Funds

Mutual Funds is a safe option of investing money in Shares.In Mutual Funds investment , the responsibiltiy of suitale investment is passed on to Professionals , who are supposed to have expertise in these types of Investments. Professional Managers choose and monitor the investments. Being qualified professionals,they use this money to create a portfolio. That portfolio could consist of stocks, bonds, money market instruments or a combination of those.


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NPS --National Pension Scheme

Govt. of India has started a new Pension scheme under the Pension Fund Regulatory and Development Authority (PFRDA) to provide National Pension Scheme (NPS) related services to corporates and individuals.
The details may be seen in PFRDA website.


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