Not knowing your real return is the most dangerous thing in the world

Anil Soni Blog

Sometimes when you innovate, you make mistakes. It is best to admit them quickly, and get on with improving your other innovations.

Steve Jobs

Part 1

See this classic example:-

Amul milk Rate in March 2007 vs today

Gold 19 vs 54
Shakti 17 vs 50
Taza 15 vs 42

Milk price (INFLATION) is increased annually by 9% Your bank FD, insurance policy, gold and real estate can't beat this inflation ( 3.5 - 6 ?ter tax return). Your return (4%) - Inflation (6%) = 2% LOSS on your Investment. Thus INFLATION is the biggest risk in the world. The profit of Amul business is more than inflation (15-20%). You should buy this business via equity investment.There are many good businesses (like banking, software, petroleum, pharma, hospital, auto, consumer and many more) which beat inflation significantly.

But how do you find such good businesses?

It's not your cup of tea but YES , it's a job of fund manager. So you must invest via mutual fund to beat inflation ( 10-15% tax free return).


Part 2

Average saving of an Indian is 30% as per RBI statistics.However it is said that most of the Indians are poor.This is mainly not because of his earnings, but his savings and spending habits.One has to know that average inflation rate is 6%, then his wealth should at least beat inflation by at least 2-3%. Even the third slab good income persons should also know that after tax income is their residual income.

Ex. If FD gives 6% interest but tax is 30%,their residual income is only 6%-1.8%= 4.2% which is very much below inflation and he is losing money and not gaining.

So invest in those assets which gives us atleast 2-3?ove after taxes and inflation


Part 3

Active income has only 10% role in one's life for becoming rich or poor. Rich people becomes rich because of their savings %(Spending habits) and choosing the right instrument to save. Savings for even 30% of our income for 15 years in a row gives appx 4.5 times of passive income what we are currently earning. 
If a person is able to save 60%, he will be getting 10 times of passive income what he is currently earning (calculated @15?GR). Instrument to save plays a very important role. We have to choose that instrument to save which gives us at least 1.5 to 2 times of inflation in long run.

So if inflation today is 6%, I should invest only in those instruments which can give me 9-12% in long term that too after tax


Part 4

Three major benefits of Debt mutual funds

1. Tax free /Tax deferment: FD of banks are taxable as per your income tax slab. However debt funds if not redeemed, are not taxable.

2. NO TDS Unlike Fd, No tds is deducted on income earned in debt funds.

3. Indexation available If period of holding of debt funds go beyond 3 years, you get indexation benefit by which it becomes almost tax free. Some amount if left after indexation, is taxable @20%.