Paramacharyal charanam Sharanam
It has been shown in 'Marshmallow test'
[
ref. wiki:https://en.wikipedia.org/wiki/Stanford_marshmallow_experiment]
that children who have self-restraint will get more reward in future than the others who do not show such restraint.
Similarly in case of investments those who wait, will have more yield of return if they take less return in initial years with a novel method called inflapro with positive inflation protection over years.
There are two methods known to investment community
- Diminishing Balance Method: whose yield is say 5.25%
- Equal instalment Method: whose yield is say 6.75%
- Now the author is giving a third method of new innovation, rather an mathematical invention called INFLAPRO whose yield is say 10.75%
It can be easily undestood from the result of a sample case.
Consider investment of Rs. 1,00,000 with interest rate of 10% per annum,
mode of compounding yearly, for a term of 20 years and inflation protection of 10%:
- Dim.Bal.method: The first year the return is Rs. 15000. Return decreases year after year and by 20th year the return is Rs. 5500. This gives a yield of 5.25%
- Eq.Instl..method: The first year the return is Rs. 11746. Return is uniform year after year and by 20th year the return is Rs. 11746. This gives a yield of 6.75%
- Inflapro.method: The first year the return is Rs. 5500. Return increases @10% year after year and by 20th year the return is Rs. 33638. This gives a yield of 10.75%
Versatility: Inflapro caters to all the three above methods by giving either -ve or zero or +ve inflation protection. The -ve inflation is nothing but deflation.
- Dim.Bal.Method equivalence: Inflapro calculations with negative value say -10% makes the method sound like diminishing balance method. The small difference is when you plot the graph of return, the erstwhile dim. bal. method gives drooping straight line whereas the inflapro method gives drooping exponential curve.
- Equal instalment method via inflapro: In Inflapro calculation if one provides 0% inflation protection, one gets exactly identical return to Equal instalment method. (popularly known as EMI when compounding is monthly).
- Inflapro: When we give positive values of inflation protection, we get normal inflapro method.
Applications: Inflapro method can be applied to any of the following conventional methods.
- Loan
- Annuity/Farm land acquisition compensation if paid as annuity
- Annuity with simple interest increase
- Fixed Deposit
- Recurring Deposit / Insurance endowment plan
- Mutual Fund/ Preference Shares
- Any other application wherein conventional fixed return (either by instalment amount or by interest parameters)
- The author has devised a return on calculation of deferred payment of Insurance Commission with retirement benefit.
Equvality: We know already from our experience that diminishing balance and equal instalment method are equivalent, when we say the interest rate is applied uniformly on the run balance and not on face value. The same is true for Inflapro method also. It applies uniform interest rate on run balance and not on face value. The equality can be proved by tables using modern MS Excel / other spreadsheets. The author has provided such audit tables in matter of clicks in web pages. All methods are equal but give different yields.
Benefits of various methods: Also refer to the presentation on INFLAPRO BASICS (presentation item No. 1) given later in this article.
- The yield is less in the diminishing balance method that means the hash total of return is less. There is no inflation protection. This means that the purchasing capacity of return diminishes rapidly and the purchasing capacity of the return in later years is too little.
- The yield is better in the Equal instalment method than that in the erstwhile diminishing balance method that means the hash total of return is better. There is no inflation protection. This means that the purchasing capacity of return diminishes year by year and the purchasing capacity of the return in later years is little given the current inflation rate.
- The yield is better in the Inflapro method than that of both the methods mentioned above. That means the hash total of return is better. There is inflation protection. The level of inflation protection is the customer's choice. This means that the purchasing capacity of return never diminishes over the years and the purchasing capacity of the return in later years is the same or even betten given the current inflation rate.
The benefit of inflapro is further explained in this weblink: https://bnvenkat.com/session/pagebenefit.php
Correlation of 'Marshmallow test':
The the 'Stanford_marshmallow_experiment' was done on children whose parents were not known to this test earlier. But now when it is known
the parents would teach the child and motivate the skill of self-control atleast during the test and would be rewarded much better
candy of their choice at home if not taken the mallow.
Inflapro can be correlated to the test mentioned at the beginning as follows:
A shopkeeper tells a child:
To pay for 6 chocolates now:
- Get 5 chocolates now and get 2 chocolate as a reward next month. The total being 7 chocolates.
- (or)Get 4 chocolates now and get 4 chocolates as a reward next month. The total being 8 chocolates.
- (or)Get 3 chocolates now and get 6 chocolates as a reward next month. The total being 9 chocolates.
The shopkeeper calculates in a fashion that for each chocolate saved now is equivalent to 2 chocolates in future. That is the shopkeeper has a
scientific method
It is the child, who has to decide which option depending on need.
Likewise Inflapro works out in a scientific way in Financial matters. How much interest portion he has to take and how much interest clubbed to balance he has to allow to grow in the same fund for later day inflation protection is a customer choice and accordingly the scheme is worked out in a scientific manner.
Dear Investors/Entrepreneurs,
A start up company can isssue preference shares at say 10% dividend for considerably long period say 20 years, and by inflapro
method, in lieu of 10% uniform rate, it can give the dividend year by year like 3.67%, 4.03%, 4.44%, 4.88%, 5.37%, ... etc
and by 20th year @ 22.42% all assured in lieu of the fixed return.
After 20 years the convertibliliy in Inflapro would be 1000 pref share :: 2242 equity shares and it is against 1000::1000 in conventional scheme.
A start up Finance Company can make use of inflapro in any of applications mentioned above.
Of course, there is another option called growth or cumulative option which entails a lockin period with no return during the term, in which there is no difference in conventional or inflapro.
Reply to a friend's feedback is also given below san the feedback video, so that one can have good view and understanding of inflapro.
- Listened to the video, you provided on selecting ELSS or NPS etc for building Superannuation fund and further investment in Market option of pension at SBI or HDFC.
- My inflapro invention is not disputing or joining or commenting such portfolio investment.
- Nor supporting any such advertiment such as (some time back) there was Tata's Mutual fund promotional ad saying is your EPF saving enough for old age retirement benefits given the condition of Inflation. (There it had considered inflation during the saving period and not inflation in post retirement.). An analysis of that scheme and my suggestion is available in one of the links in this website.Fund GAP in your EPF generation ../custom/SHAREMFSUDHA/tatapromo/SAVsufficient.html#top
- [My personal investment return on Equity linked Saving Scheme (ELSS) with KOTAK MF was 12.5% during 2007-2012 five year period.]
- My inflapro is beyond that.
- After getting convinced by your consultants and advertisement one may select SBI, or HDFC, or ICICI, or KOTAK, or TATA or BIRLA Sun etc etc or NPS or some mixed basket one has a free choice of investing in market option on maturity. ie. selecting pension scheme from any of market players. There is no compulsion that one should invest to the same company for Annuity after buiding up the fund (say from age 25 to 60).
- There are 7 basic LIC options and the option 2 of LIC has further sub options of guaranteed pension for 5,10,15,20 years thus the total option is 10. OPTIONS of all other companies are fitting into few or all options of LIC.
- In LIC (Jeevan Akahay VI option 4 or Jeevan Shanti option G) there is 3% increase every year in pension Simple interest pattern which is modified in ICICI (one of the option ) 5% simple interest with less starting pension than 3% SI option. This scheme of option 4 or option G of LIC is somewhat similar to my INFLAPRO OPTIONS.
- In inflapro options there are 12 options (can be increased to many more with different moratorium period and different percentage of continued pension after the last year of INFLAPRO TERM and different inflation protection percentages). One of the inflapro option is the conventional same LIC option. So it is 11 further options to existing one. There is also a cumulative option (13th) apart from these which can be used for comparison purposes. The comparison is that the YIELD in cumulative option is always more than any of the other 12 options.
- These 12 options can be applied and 12 equivalent option of each of these LIC 10 options. That means in INFLAPRO there are 120 total options. (in fact it is fairly unlimited number of options)
- Once should be familier with LIC pension options to understand the pension scheme inflapro. They are reproduced here below:
- Option (i) Annuity payable for life at a uniform rate.
- Option (ii) Annuity payable for 5, 10, 15 or 20 years certain and thereafter as long as the annuitant is alive. The rate table in LHS of the concerend web page shows rate for 15 years term of this option, others it varies, and exact figure can be obtained from LIC websites.
- Option (iii) Annuity for life with return of purchase price on death of the annuitant.
- Option (iv) Annuity payable for life increasing at a simple rate of 3% p.a.
- Option (v) Annuity for life with a provision of 50% of the annuity payable to spouse during his/her lifetime on death of the annuitant.
- Option (vi) Annuity for life with a provision of 100% of the annuity payable to spouse during his/her lifetime on death of the annuitant.
- Option (vii) Annuity for life with a provision of 100% of the annuity payable to spouse during his/ her life time on death of annuitant. The purchase price will be returned on the death of last survivor.
- Apart from these above there is one PM Vaya Vandana Scheme of LIC which now gives 7.4% return with return of purchase price after 10 years.
- Each of 7 LIC options above plus PMVVY has one conventional same and 11 other options if you apply INFLAPRO
- For example the Conventional pension in the case of option (vii) or option 7 of Jeevan Akshay VI or option J of Jeevan Shanti at present provides 6.24% return in case of annuity for life with a provision of 100% of the annuity payable to spouse during his/her life time on death of annuitant with return of purchase price to nomineee on death of last survivor. (some other market players have this option some do not have. The author considers this is best option and LIC is the one which gives maximum return among the players). [In your video there is no mention of LIC but considered only SBI and HDFC.]
- The equivalent 3 options (apart from the Rs. 6240 per lac conventional one ) is explained below:
- Rs. 2115 in first year per year per lac (in inflapro option 4 within LIC option vii) and increases at 10% every year compounded. At end of 25 years (i.e at age 85) the purchase price of 1 lakh is returnable irrrespective to survival of Annuitant or spouse or their nominee.
- Rs. 1396.44 in first year per year per lac (in inflapro option 7 within LIC option vii) and increases at 10% every year compounded. At end of 25 years (i.e at age 85) the enhanced purchase price of 2.20 lakh is returnable irrrespective to survival of Annuitant or spouse or their nominee.
- Rs. 1844 in first year per year per lac (in inflapro option 10 within LIC option vii) and increases at 10% every year compounded. At end of 25 years (i.e at age 85) the enhanced purchase price of 1.45 lakh is returnable irrrespective to survival of Annuitant or spouse or their nominee.
- There are other inflapro options as well within the LIC option vii.
- These 12 options are for inflation protection of 10%. We can derive 12 more options for inflation proterction of 6%.
- These 12 options are for inflation protection of 10%. We can derive 12 more options for inflation proterction of say 6.667%.
- These 12 options are for inflation protection of 10%. We can derive 12 options for pension after last pension of term 85 years age) @ some percentage say 33.333%.
- Like this we have 12 options for each of other six major LIC options and and also for 3 more sub LIC options. and different level of inflation protection desired. So the inflapro options are innumerable.
- The moral of the story is the inflapro is implementable by govt or these institutions of market players themselves or a new company catering to the equivalent to any of market player option or any other custom option.
Here are some google presentation links for inflation protected return on investment.
The 'INFLAPRO' divised by the the author is calculation of interest and return w.r.t applications of PENSION/ LOAN/ Fixed Deposit(FD)/ Recurring Deposit(RD).
Farm land compensation is outcome of pension scheme and inusurance is outcome of RD.
- A paradigm shift in interest allocation, early diminishing method to contemporary EMI to the author's proposed dynamic allocation of interest rates is the crux of this innovation.
- This dynamic allocation of interest rates protects the customer from inflation, is at the same time beneficial to the banking industry.
- Due to this dual benefit the Inflapro method is also good for the economy in the long run especially when the people in general are unable to bear the high rate of interest in the current covid hit economic crisis in the current decade.
The benefits of inflapro is explained in this weblink: https://bnvenkat.com/session/pagebenefit.php
THERE ARE 10 ITEMS IN THIS WEBPAGE/PDF with item 9 as revision of item 7, the items are listed in descending order, so the item 1, THE INFLAPRO BASICS IS AT BOTTOM OF THE LIST.
The comprehensive illustrations of various schemes with custom menu is available in website www.bnvenkat.com
and also in website www.bnv.bvraghav.com
A number of free sample calculations are available in these sites, but require brief demonstration and log in registration for viewing successful custom menu operations.
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