A GURU is always a GURU, he just acted being stumped. See how Mango Man and GURU ‘concluded’ their on-going chat. Click here to read first part of their conversation.
After listening to Mango Man’s master plan, GURU responds:
GURU: Yeah, perfect! So 2.5 + 3.5 = 6 lakhs, what are you going to do with that after 15 years?
Mango Man: Ahh, it's a part of my retirement 'goal'. I knew you were going to come to this. I have heard you lecturing about Goals a lot.GURU: Smart, but you will be retiring after 30 years, isn't it?
Mango Man: Yeah Yeah, today I will show you that my Math is better than your philosophical lectures. So, I will have nearly 6 lakhs after 15 years. I will reinvest those 6 lakhs in an equity related mutual fund which will give me a return of about 15%. Sooo, I’ll have about 49 lakhs just from the money invested in one year :D
GURU: Great! So, now you very well know how to use the Financial Calculator, right?
Mango Man: Yes!GURU: Okay, just calculate how much your money will become if you invest Rs. 100,000 once in a lifetime for 30 years at 15% rate of return..
Mango Man: That was straight, its 66 lakhs! **Something just struck the Mango Man**
GURU: : Let’s talk about some Math now :) So, by Investing Rs. 100,000 + 30,000 by saving taxes, you will accumulate some 49 lakhs applying your master strategy. And had you invested Rs. 100,000 directly in equity related instrument for 30 years, you would have made about 66 lakhs in 30 years. Just that, you wouldn’t have got the luxury to save some tax..
Mango Man: I am stunned :|
GURU: So, to meet your long term goal of retirement which is after 30 years, you are losing the opportunity to gain from long term gains of equity markets by putting your money in tax saving debt instruments.
Mango Man: Do you mean to say that saving taxes is a ‘financial suicide’?
GURU: Do you work for FINDIA TV or what? Don’t put words into my mouth ;) I never said that. I just wanted to give you an example where you have better options than tax saving instruments. It’s not all about saving taxes! It depends on what your goal is.
Mango Man: ‘It depends’, the diplomatic answer given by every ‘Gyaani’ :D
GURU: Haha..don’t worry..I am not being diplomatic..My goal is to expose you to the truth ;) Next time, we’ll see the other side.
Mango Man: I got you! You made sense today. Why can’t you always tell things mathematically? Why do you have to get philosophical about it?
GURU: Didn’t I provide you with the simple calculator to try things mathematically? Follow my posts properly … And, let’s keep the philosophy for some other time :)