A helping hand from numbers leads to objective opinions and confident decisions!!!

Goal planning focusses on long haul projections while budgeting is more “current time”. Goal planning requires near perfect discipline. Budgeting gives you flexibility. All these points aside - my biggest gripe with goal planning – never seen anybody do goal planning basis real rate of return . Corpus projections basis nominal rate of return is commonplace. Going for real rate of return is difficult – because one needs to get an approximate idea of his / her personal inflation rate. Figure this – INR 25 Lacs invested for 20 years end up with corpus of: -             INR 2.41 Cr @ nominal CAGR of 12%. But hey, hold on - there’s a psychological trap in this number – your mind gets tricked into believing you did good because you measure purchasing power of this corpus of INR 2.41 Cr in current price terms   -           Now assume your personal inflation rate for next 20 years...

How quickly money doubles in any risk (growth) investment? That, I think is the best measure of categorizing returns into buckets of “Satisfactory”, “Good” and “Excellent”. And for good measure, let us also throw in the “Extraordinary” return bucket. Though we need to establish a reference point first. Like it or not, comparison or relativity needs to be there. Let’s say you get 5% post tax returns from fixed rate (risk free?) investments. It takes slightly more than 14 years to double the money at this rate of return. Here is my categorization of returns from risk investments: -           Satisfactory: Money doubles in two thirds the time of fixed rate of return. A return of 7.59% does this trick. Quiet a lowly return one would say. Do realize that it takes nearly 5 years lesser to double the money than fixed rate ROI   -           Good: Money doubles in half the time of fixed r...