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If you are holding fixed deposits, you could use this calculator to compute:

  • tax you need to pay each financial year after accounting for TDS
  • advance tax instalments to be paid (if applicable)

This calculator is a spin-off my recurring deposit calculator which was featured in OneMint. The calculator was requested by Anshu and is based on discussions with Praveen Kumar regarding advance tax.

Of all the calculators I have made, RD and FD calculators would rank among the toughest. This is because of the nature of compounding and nature of taxation.

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This summer I am spending quite a bit of time with my 16 year old nephew. He is a philosopher, writer, artist and entrepreneur! He makes money by doing chores for his parents. He makes money by doing drawing assignments and other odd jobs for his friends! When I asked him where this money goes he said, “my mom (a banker) puts it in FDs and RDs”. I asked him to start a SIP in an equity MF but he seemed uninterested.

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Question 2: Name mutual fund types with near zero probability of money-loss?

I am big fan of lowering risk and tax. Before I save and invest I try to choose instruments with minimum risk and tax out-go. Of course the type of risk differs: loss-of-money-risk when saving and loss-of-value-risk (or inflation risk) when investing. Choosing instruments for investing (for long-term goals) is much easier than choosing instruments for saving (for short term goals), simply because there are more options for saving. A typical everyday example is choice of debt funds: most investors are confused about which debt fund to choose when.

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‘How much risk an investor can take’ and ‘how much risk he should take’ are two very different things. ‘Invest as per your risk appetite’ is half-decent advice. However it is not universally valid. A person who hates equity can choose to avoid it only if he can afford to regularly invest a sizable (often impractical) amount of money for long term goals. A person who loves equity cannot invest in it if his goal is only a couple of years away. The investors risk appetite is relevant only when the goals risk appetite is also accounted for.

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One of the first steps towards taking control of ones financial life is to list down all long-term and short-term goals that one needs funds for. The next step is to use a calculator to estimate how much one needs to invest for each goal independently. The results can often be frightening and sometimes even depressing. The total monthly investment amount needed to achieve all long term financial goals (let us call this Y) is often out of reach because of low salary, high expenses, liabilities and so on.

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