If you have a habit of saving, then you should also educate yourself on financial management since you have a lot to lose if its not managed properly.

1. Assuming you plan to put 50k into this scheme, plot out a 30 year (or however many year savings plan) excel that allows you to see how much money you would have if you put the same money in FD for 30 years constant at 2.5%, 3%, 3.5%.

2. Refer to the scheme's table of returns, and compare the figures at 10, 15, 20, 30 years with your FD figures. If its not a guaranteed figure (it usually isn't), compare both minimum and maximum range.

3. Then answer these questions

i. At what point does this scheme yield better than FD (in the best case scenario and worst case scenario) - this tells you how long you have to lock your money up to finally beat the flexibility of FD.

ii. What is the actual compounded return of investment by the scheme? Just play around with your FD interest rate until you hit a figure close to what the scheme table has, and that's the compounded rate. For example if worst case scenario the compound rate is 3%, best case 5.5%, then ask yourself is it worth locking up the money for so long for up to an additional 2% but could be no addition or even less if FD interest rates go up further.

In the end the question is how much MORE are you getting over FD by locking in your money for XX years? Does it appeal to you or would you prefer to get less but have the flexibility to move your money around for XX years?

The more money you have, the more important it is to know whats happening to it.


This post has been edited by xjeez: Dec 2 2011, 12:40 PM