HOW MUCH YOU REALLY GET Five questions you should ask to compute your actual returns from your investment.
1
3
Is this an annual return
Is it post-tax
The actual returns will come down after tax is deducted from the total corpus.
Advertised
100%
Return
10%
What this means 100% each year over 10 years on an investment of Rs1 lakh=
For individuals in 30% tax bracket
4
Rs10.2 crore
5
If the fund manager deducts 2% as cost every year, then your net return will be 9.76% per annum.
after 10 years
Annual return: 7%
Is it simple interest or compounded
Returns as per compound interest
For individuals in 10% tax bracket
Is it postinflation?
Ask, is it post-cost
Rs2 lakh
Return
For individuals in 20% tax bracket
If you account for increasing inflation each year, the actual returns will go down.
Return 10%
100% after 10 years on an investment of Rs1 lakh=
2
9%
Is it post-cost
after 10 years
OR
8%
7%
Return
Your real rate of return
Inflation
Return
10%
4%
6%
COMPOUND INTEREST: Interest is added back every year to the principal amount and both earn interest.
Rs1 lakh after 10 years will return Rs2.59 lakh on
10%
a 10% compounded return
1.00
1.10
1.21
1.33
1.46
1.61
1.77
1.95
2.14
2.36
1
2
3
4
5
6
7
8
9
10
10
1.00
1.10
1.20
1.30
1.40
1.50
1.60
1.70
1.80
1.90
2.00
2.59 End of
Year
Returns as per simple interest
SIMPLE INTEREST: When the interest earned is not added back to the principal each year.
(Return figures in Rs lakh)
Source: Mint research