I don’t know if I can afford to buy a Rs.10 lakhs worth car?
Sandesh Aggarwal wanted to buy a car worth
Rs.10 lakhs in today’s value after 5 years. He is 29 years old and is working
as a QA engineer in Ahmedabad. His wife is working as a customer service
executive. He has some savings in bank and has got a couple of insurance plans.
There is nothing he can set aside for this goal now. But he is willing to save
Rs.12000 per month. He has invested in stock earlier but does not have any
investments in stocks now.
Sandesh’s situation was analysed and provided him strategies and advice to achieve his goal as given below:
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Requirement |
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Cost of buying a car in today's Value |
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₹ 10,00,000 |
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Cost after 5 years assuming price change @ 8% p.a. |
₹ 14,69,328 |
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Resources Available |
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Assets set aside for the goal in today's value |
NIL |
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Monthly Savings that can be allocated to this goal |
₹ 12,000 |
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Suggested Asset Allocation |
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Assuming Conservative Risk Tolerance and Short time horizon the following asset allocation is suggested todeploy the assets allocated for the goal and to allocate the savings |
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Rate of Return expected annually from the suggested asset allocation |
10.40% |
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Analysis |
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Value of Assets set aside for the goal after 5 years |
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₹ 0 |
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Value of Savings allocated for the goal after 5 years |
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₹ 8,86,162 |
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Total resources available at the time of goal |
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₹ 8,86,162 |
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Shortage at the time of goal |
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₹ 5,83,166 |
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Strategies |
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Take a car loan for the amount equal to the shortage. Assuming a home |
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Loan interest rate of 12%p.a for 5 year period the EMI will be Rs.12972 |
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Where to Invest? |
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1 |
Out of the Rs. 12000 monthly savings, start SIP of Rs.2400 in diversified equity fund, |
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SIP of Rs.3600 in a dynamic bond fund and Rs.6000 in cooperative bank RD account |
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2 |
Review the investments and SIPs once in every year |
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Prognoadvisor, the leading Online Financial Planning company, can help you solve your financial concerns and issues through its well-defined analysis and planning process.
The above case study is for illustrative purpose only and is not a recommendation or advice for a similar situation you might face since there are many other factors which will require a different approach to your situation.
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