I have been running some numbers and thought of sharing with a view to get some opinion.
In the below calculations, I am running different investment strategies, with constants assuming a 12% rate of return in equity investment, an initial corpus of 1 crore and a time horizon of 20 years.
Strategy 1;
Deploy 1 Crore today and get a return of 12% CAGR for 20 years. The result is 9.64 Crores.
Strategy 2;
Deploy only the interest of the 1 crore which is taken at 7% and the core 1 Crore is never touched. We end up with 6.7 Crores (5.7 in the returns and 1 crore still in the bank as it was never deployed)
So is just deploying interest income not a wise strategy as the effect of any drawdown is taken out in portfolio building as it smoothens out the ups and downs and gives a very acceptable return sleep adjusted?