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Manish M Tulasi
Ā ā¢Ā
Mitra RobotĀ ā¢Ā 9m
Mutual Funds: A Closer Look at the Real Returns Many people say that mutual funds are a great investment, but have we truly calculated the real returns, considering all factors like inflation and taxes? Let me break it down with a simple example. Initial Investment: ā¹25 Lakh Over a period of 10 years, let's say your ā¹25 lakh investment grows to ā¹50 lakh. Thatās a ā¹25 lakh gain, right? Now, letās factor in inflation at 6% per year: After 10 years, the value of ā¹25 lakh decreases due to inflation. Adjusted for inflation: ā¹25 Lakh (initial) Ć 6% inflation annually = ā¹13 Lakh loss in purchasing power over 10 years. So, your ā¹50 Lakh at the end of 10 years is effectively worth ā¹37 Lakh in today's money after inflation. But wait, thereās more! Taxation: The government will tax your ā¹25 Lakh profit (after inflation) at 10%, so: ā¹24 Lakh Ć 10% tax = ā¹2,40,000 tax payable. Now, let's subtract the tax and the inflation impact: Profit after tax and inflation: ā¹25 Lakh (initial profit) - ā¹2,40,000 (tax) - ā¹13 Lakh (inflation loss) = ā¹9,60,000 - ā¹10,00,000. So, over 10 years, youāre left with just ā¹9-10 Lakhs in profit, or approximately ā¹1 Lakh per year. Now, ask yourself: Is this really such a great return? Mutual funds may offer growth, but when you factor in inflation and taxes, the net returns might not be as impressive as they seem at first glance. Letās make smarter, more informed investment decisions!
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