taking loan and invest in small cap index fund , getting cagr 17% and 30% return, after 5 years, result. as below.
if want to take loan( pay intrest amont only from my salary,after howmany years i want to pay entire amount, mf by getting compounding benifit), 10lakh, invest in small cap index fund ? give table wise denomiation?
ChatGPT said:
Great! You're considering a loan-based investment strategy:
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Take a loan of ₹10 lakh
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Invest it in a Small Cap Index Fund (e.g., Nippon India Nifty Smallcap 250 Index Fund – Direct Plan – Growth)
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Pay only interest monthly from salary
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After a few years, redeem mutual fund to repay full loan (principal) from compounded returns
Let’s break it down in a structured way:
✅ Assumptions
| Item | Value |
|---|---|
| Loan Amount (Invested) | ₹10,00,000 |
| Investment Duration | 5 years |
| Fund Type | Smallcap Index Fund (Direct) |
| Expected Fund Return (CAGR) | ~17% annually (historical avg) |
| Loan Interest Rate | 10% p.a. |
| Interest Paid Monthly | From salary only |
📈 Compounded Value of Investment (17% CAGR)
| Year | Fund Value (₹) | Gain (₹) |
|---|---|---|
| 1 | ₹11,70,000 | ₹1,70,000 |
| 2 | ₹13,69,000 | ₹3,69,000 |
| 3 | ₹16,01,000 | ₹6,01,000 |
| 4 | ₹18,73,000 | ₹8,73,000 |
| 5 | ₹21,92,000 | ₹11,92,000 |
💸 Interest Outflow (Only Interest Paid)
| Loan Principal | ₹10,00,000 |
|---|---|
| Interest Rate | 10% p.a. |
| Annual Interest | ₹1,00,000 |
| Monthly Payment | ₹8,333 |
| Total Paid (5 yrs) | ₹5,00,000 (interest only) |
🧾 Net Profit After Repaying Principal
| Item | Value |
|---|---|
| Fund Value after 5 years | ₹21,92,000 |
| Loan Principal to Repay | ₹10,00,000 |
| Interest Already Paid | ₹5,00,000 |
| Net Profit (post loan) | ₹6,92,000 |
💡 Summary Table
| Component | Value (₹) |
|---|---|
| Loan Taken | ₹10,00,000 |
| Total Interest Paid | ₹5,00,000 |
| Final Fund Value | ₹21,92,000 |
| Loan Repaid (Principal) | ₹10,00,000 |
| Net Gain (Profit) | ₹6,92,000 |
✅ Is it Worth It?
| Pros | Cons |
|---|---|
| Leverages power of compounding | Risk of market volatility (smallcap fund) |
| Net positive returns even after loan | Needs consistent salary for EMI |
| You retain ownership of ₹6.9L profit | You bear the full market downside |
🧠 Ideal Use Case
This works only if:
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You have a stable job (to pay monthly interest)
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Can stay invested for 5+ years
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You’re okay with short-term volatility (smallcap funds are volatile)
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Loan is low-cost (≤10%) and not secured on critical assets
⚠️ Risk Warning
If markets underperform (e.g., only 10–12% CAGR), your final value after 5 years may be around ₹16–17L — barely enough to beat the interest.
You must stay invested for full duration and resist panic selling.
✅ Want Automation?
Would you like:
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A Google Sheet that simulates this for any loan amount, interest rate, fund CAGR?
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Or a Python Colab version for real-time CAGR calculation and what-if scenarios?
Let me know — I’ll prepare it.
You said:
ChatGPT said:
Sure! Here's the updated table based on 30% CAGR over 5 years with a ₹10 lakh loan, only interest paid from salary (10% rate):
📈 Compounded Value of Investment (30% CAGR)
| Year | Fund Value (₹) | Gain (₹) |
|---|---|---|
| 1 | ₹13,00,000 | ₹3,00,000 |
| 2 | ₹16,90,000 | ₹6,90,000 |
| 3 | ₹21,97,000 | ₹11,97,000 |
| 4 | ₹28,56,000 | ₹18,56,000 |
| 5 | ₹37,13,000 | ₹27,13,000 |
💸 Interest Outflow (Only Interest Paid)
| Loan Principal | ₹10,00,000 |
|---|---|
| Interest Rate | 10% p.a. |
| Annual Interest | ₹1,00,000 |
| Monthly Payment | ₹8,333 |
| Total Paid (5 yrs) | ₹5,00,000 (interest only) |
🧾 Net Profit After Repaying Principal
| Item | Value (₹) |
|---|---|
| Fund Value after 5 years | ₹37,13,000 |
| Loan Principal to Repay | ₹10,00,000 |
| Interest Already Paid | ₹5,00,000 |
| Net Profit (post loan) | ₹22,13,000 |
💡 Summary Table
| Component | Value (₹) |
|---|---|
| Loan Taken | ₹10,00,000 |
| Total Interest Paid | ₹5,00,000 |
| Final Fund Value | ₹37,13,000 |
| Loan Repaid (Principal) | ₹10,00,000 |
| Net Gain (Profit) | ₹22,13,000 |
