Good read on India’s progress in Air Defence
3 Likes
As highlighted in Pulak Prasad’s book and the rabbit story, we often fail to visualise the enormous effect of compounding. I asked Gemini to create a chart for Warren Buffet’s enormous compounding
Explanation:
Here is the plot comparing the cumulative returns of Berkshire Hathaway (BRK.A) and the S&P 500 index from 1966 to 2024.
As you can see from the graph, Berkshire Hathaway has significantly outperformed the S&P 500 over this period. The cumulative return is indexed to 1 in 1966 for easier comparison, and a logarithmic scale is used for the Y-axis to accommodate the large difference in the final values.
QPlease note that the request included plotting up to 2025, but as that is in the future, the graph displays data up to the most recently available full year, which is 2024.
Based on historical data, Berkshire Hathaway’s compounded annual gain from 1965 to 2024 was approximately 19.9%, while the S&P 500’s annual return was around 10.4% over the same period (including dividends). This resulted in a cumulative return of over 5,500,000% for Berkshire Hathaway compared to approximately 39,000% for the S&P 500 from 1964 to 2024.
Covered very nicely in ET Wealth today
9 Likes
What’s your final thoughts on NPS. After reading I don’t think it’s a good option
In Summary -
NPS Offers significant tax savings during accumulation, facilitates market linked compounding for long tenure at negligible management fees and offers 60% of corpus tax free on withdrawal. So even with low annuity on the remaining 40% - it remains a compelling option, especially for folks in the highest tax bracket
Long version:
The National Pension System (NPS) is widely considered a valuable retirement planning tool in India, even though the annuity rates offered upon retirement might be perceived as relatively low by some. The strength of NPS as a retirement option stems from several key features and benefits that significantly contribute to wealth creation during the accumulation phase and provide flexibility at the time of withdrawal.
Here’s why NPS is considered a good retirement option despite its annuity rates:
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Significant Tax Benefits: NPS offers attractive tax advantages during the contribution phase, which are a major draw for many subscribers:
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Section 80CCD(1): Tax deduction for your own contributions up to 10% of salary (Basic + DA) or 20% of gross income for self-employed, subject to the overall limit of ₹1.5 lakh under Section 80CCE.
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Section 80CCD(1B): An additional deduction of up to ₹50,000 for voluntary contributions. This is over and above the ₹1.5 lakh limit under Section 80CCE, providing a total potential deduction of up to ₹2 lakh on your own contributions.
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Section 80CCD(2): Tax deduction on employer’s contribution to your NPS account, up to 10% of salary (Basic + DA) for private sector employees and 14% for Central Government employees. This benefit is also over and above the limits under Section 80C and 80CCE.
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These tax benefits reduce your taxable income, leading to immediate tax savings that can be reinvested to boost your retirement corpus.
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Potential for Higher Returns During Accumulation: NPS is a market-linked product, allowing investments in various asset classes including equity (up to 75% for private individuals, with a lifecycle fund option that adjusts allocation based on age), corporate bonds, government securities, and alternative investments. While market-linked means returns are not guaranteed and can fluctuate, the exposure to equity over a long investment horizon has the potential to generate higher returns compared to traditional fixed-income instruments like Public Provident Fund (PPF) or Employees’ Provident Fund (EPF) during the accumulation phase. This potential for higher growth helps in building a larger corpus.
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Low Cost Structure: NPS is known for its remarkably low fund management and administrative charges compared to many other investment products. Lower costs mean a larger portion of your contribution is invested, maximizing the power of compounding over the long term and leading to a potentially bigger retirement corpus.
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Flexibility in Investment and Portability: Subscribers have the flexibility to choose their investment strategy (Active Choice or Auto Choice) and select from various Pension Fund Managers (PFMs). The option to allocate funds across different asset classes allows individuals to tailor their investment mix based on their risk appetite and financial goals. Furthermore, NPS is portable, meaning the account (PRAN) remains the same regardless of job changes or relocation, ensuring continuity in retirement savings.
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Tax-Free Lump Sum Withdrawal: At the time of retirement (age 60), you are required to annuitize at least 40% of your accumulated corpus to receive a regular pension. However, the remaining 60% of the corpus can be withdrawn as a lump sum, and this entire amount is tax-free. This tax-free lump sum provides significant financial flexibility. You can use this amount for immediate needs, invest it in other avenues for potentially better returns or income, or manage it as per your requirements, which helps mitigate the impact of potentially lower annuity rates on the mandatory portion.
While it is true that the annuity rates offered by Annuity Service Providers (ASPs) for the mandatory 40% corpus might yield a relatively modest regular income, the overall benefit of NPS comes from:
- The substantial corpus built over the years through disciplined contributions.
- The significant tax savings enjoyed during the accumulation phase.
- The potential for market-linked returns to accelerate corpus growth.
- The flexibility provided by the 60% tax-free lump sum withdrawal.
Therefore, despite the characteristic of mandatory annuitization of a portion of the corpus and the prevailing annuity rates, NPS remains a good retirement option in India primarily due to its powerful combination of tax benefits, low cost, investment flexibility, and the tax-free lump sum withdrawal, all of which contribute significantly to building a substantial retirement nest egg.
8 Likes
A candid Samit Vartak at his finest. He is one of the finest fund managers in our present time. Lot to learn from his every interaction
2 Likes
A fascinating read on changing dimensions and cutting edge research from US Defence
1 Like
Ready reckoner for India Defence businesses - who does what
For people who are looking at playing a basket approach in a tax efficient manner, this fund could be considered
Fund Portfolio:
10 Likes
Comprehensive coverage of Indian Solar sector looking at the opportunities and key challenges
https://www.magzter.com/en/stories/business/Outlook-Business/INDIAS-SOLAR-CENTURY
Good insightful deep dive on the Chemical Sector
1 Like
An amazing talk from one of the best minds in AI today as he connects the dots on LLM evolution, draws parallels with electricity, limitations, new applications with Agentic AI and Vibe coding. Truly Software 3.0 will look a lot different and if Indian IT majors don’t position themselves to the new reality, millions of jobs will be at stake
5 Likes
An immersive session with Sambhv Steel promoters disseminating the sectoral opportunity and the stock story by @Worldlywiseinvestors Great session
4 Likes
Good breakdown of the Jane Street crackdown by SEBI. F&O is increasingly becoming a big player’s game and laden with blatant manipulation. Retail is better off investing - either directly or via Index funds
4 Likes
Finally a good fund option for global investments (US/EU/Japan etc) without getting bogged down by Mutual Fund foreign investment caps.
Being operated out of gift city this fund leverages the Individual’s annual outbound LRS limit and one can easily invest upto $250K per year (around 2.14 Cr INR) in global assets from India
7 Likes
Humongous wealth creation in Small & Midcaps in the last 5-10-15-20 years timeframes. A lot of these stocks were well identified and dissected here at VP, however only a few would have hold on to gems like #Astral or #Ajanta over the last 20 years.
Imagine 1L turning to 3.27 Cr in an Ajanta Pharma or Bajaj Finance if held since 2005.
8 Likes