Views on Life & on Equity Investing

Wonder, Wealth & Abundance

How much does one need to retire from working-for-a-living job

with 5 comments

I wrote this in Rahul’s blog earlier, but repeating.

All money, we need  for your  family’s and possibly future generations is 50 times our annual expenses.

If your annual expenses are 10 Lacs then you need 5 crore Rs only for your financial freedom and also for next many generations.

How ?

If you put 5 Crore Rs in 50 good stocks that are likely to exist far into future, then you will get 2% dividend yield, which is 1/50th of your original amount i.e. 5 Crores. This is in case of growth companies, if you buy Public Sector Bank that you can also get 5-7% dividend yield on your principal.

You can keep spending 2% return on your investment every year which is 10 lacs, and companies will keep growing to take care of inflation. Dividends will also rise. Infact money will grow so much that even if you have half a dozen children, they would not need to work. Hence we don’t need more than 50 times our annual expenses to be free from working-for-a-living jobs.

It involves investing in dividend paying companies, sacrificing growth a bit. We may consider 30% in FDs to protect ourselves from volatility of equities when they are historically high PE ratios on Nifty, we will also need to revise the list every year and keep tabs on companies. We may also want to invest 25% of our funds in another country (possible to invest in 24 exchanges across the world now through Kotak Securities)  to protect from wars. With active investment, returns can even be improved.

Not to forget, to protect against eventualities – health, house, car insurance is required and expenses reined within those limits.

Regards

Written by amitdipsite

November 13, 2010 at 8:33 pm

Posted in Uncategorized

5 Responses

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  1. Hey Amit,

    Good Post man.
    Actually this is the question i am sure most of the people find it difficult to calculate.But you put it in a very easy way.
    Thanks Man.

    Regards,
    Vikas

    Vikas

    November 14, 2010 at 1:39 am

  2. Dear Amit,
    Humm, Ok so this much amount I need🙂. Nice calculations. Your idea of 24 exchanges is also some thing new I have heard of. So what sort of product available or it like we can put money on Index funds.
    Able to recall, how jim rogers was able to invest in world and bought dirt cheap business/metals/indexes.
    You do something on this?

    Thanks for giving me my “Lakshya”🙂.

    take care.
    Rahul

    Rahul Kumar Paliwal

    November 15, 2010 at 7:12 pm

  3. Dear Rahul,

    Never invested through KOTAK international trade, buts
    its easy as..for any person. I would imagine any share in any country, not just index (to be confirmed).

    http://www.kotaksecurities.com/internationaleq/homepage.htm

    I have invested in NZ, Australia, UK and India only. Now India only, it has awesome deals, no need to look elsewhere for now for growth.

    Regards

    Amit

    I have not invested

    Multibagger

    November 15, 2010 at 9:29 pm

  4. Ain't it BS? Who is going to account for Inflation?

    moy

    December 6, 2010 at 4:21 pm

  5. Certainly not Bullshit.

    Where is inflation going to come from

    Tomatoes, Potatoes, Fuel ?

    In that case can't TTK Prestige increase price of cookware ? You own the company even if it is .002% ? Good companies pass on more than inflation to end user. They increase price every year inflation or no inflation.

    Multibagger

    December 6, 2010 at 5:51 pm


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