How To Invest For Early Retirement | How to RETIRE in YOUR 30s | Finance With Sharan
Published: 2023-03-04
Status:
Available
|
Analyzed
Published: 2023-03-04
Status:
Available
|
Analyzed
Predictions from this Video
Incorrect: 0
Prediction
Topic
Status
A lean FIRE number is calculated by multiplying annual expenses by 20. For example, 6 lakhs annual expenses would require 1.2 crore.
"if you multiply that by 20 it's around 1.2 cres so if I have 1.2 cres today I can actually call myself to have lean five"
Pending
Adjusting for inflation to retire at age 40 with 6 lakhs annual expenses (inflation-adjusted to 11.3 lakhs) results in a lean FIRE number of 2.3 crore.
"so that takes my lean fire number to 2.3 cror"
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To achieve 2.3 crore by age 40, approximately 42,000 rupees per month needs to be invested, assuming 11% post-tax returns and a 10% annual increase in investment.
"the math says that you need to invest about 42,000 rupes per month to achieve 2.3 cres at the age of 40"
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The normal FIRE number is calculated by multiplying annual expenses by 25.
"now the next type of fire number is the normal fire number which is simply 25 times your annual expenses"
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With an annual expense of 6 lakhs, the normal FIRE number is 1.5 crore.
"now if I multiply that by 25 that's 1.5 CR so if I have 1.5 CR with me I can actually call myself fired"
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The Fat FIRE number requires 50 times your annual expenses, allowing for higher spending and wealth transfer to heirs.
"Fat fire as the name suggests it's a very very big number so according to Fat fire you actually need to have around 50 times your annual expenses"
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Even an 8% FD interest rate may not outpace current inflation rates of 7-8%.
"even if the banks are offering 8% FD it is still not going to be able to beat inflation which is around 7 to 8% right now"
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For someone in the 30% tax bracket, an 8% FD yields an effective return of 5.6% after taxes.
"so even if it's like an 8% FD which is like the best case scenario your effective returns would be like 5.6 percentage"
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Equity has historically provided a Compound Annual Growth Rate (CAGR) of approximately 14% over the last 30 years.
"Equity is the best performing asset class it has given us around 14% cagr over the past 30 years"
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The Indian stock market index (Nifty) experienced a drawdown of nearly 59% in 2008.
"for example in 2008 the Nifty which is the aggregate of the Indian stock market fell by nearly 59%"
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A proposed asset allocation for Lean FIRE includes 60% domestic equity, 10% US equity (S&P 500 ETF), 15% debt (FDs, debt funds), 5% gold, 5% crypto, and 5% real estate (commercial properties or REITs).
"so 60% would go into domestic equity which is the Indian stock market 10% would go into US Equity I primarily invest in the S&P 500 ETF which is like the Nifty of the US market another 15% would go into debt which could be fixed deposits and debt mutual funds 5% would go into gold which could be sovereign gold bonds and gold mutual funds another 5% would go into crypto and the last 5% would go into real estate"
Pending
Within the 60% domestic equity allocation, 40% should go into large-cap index funds, 40% into actively managed mid-cap funds, and 20% into actively managed small-cap funds.
"so within domestic Equity there is large capap funds midcap funds small cap funds so how to know how to divide your money across these sub assets so this is how I do it within the 60% domestic equity around 40% of her money is going into index funds of large capap companies another 40% is going into actively managed midap funds and the last 20% is going to actively manage small cap funds"
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Portfolios should be rebalanced every six months to one year.
"Next Step you need to do is rebalance your portfolio every 6 months to one year"
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