It was about 10 years ago that I suggested an asset replacement fund for a friend. He and his wife were just starting life and wanted to save/ invest in a scheme which would gather enough money to buy assets. Assets in this case were actually expenses (but we cheat ourselves by calling them assets).
So a washing machine, refrigerator, a/c, ….and all the white goods came from that fund. They started with just Rs. 3k per month in HDFC PRUDENCE Fund.
Whenever she wants to buy an asset, all she needs to do is to look at that fund – and if there is enough money just go and buy the asset. I know they increased the amount that they were putting into it..but frankly do not have the full details. I also know that all their white goods came from that fund, and they were happy that assets were being acquired without much argument, tension, etc. The fact that both their salaries went up well, and they are doing well surely helped.
However, they were LUCKY enough to buy some big assets in 2007 (bouyed up by a bulging fund) and SMART enough to keep investing through the market lows of 2008 – and WISE enough to know the difference between the two!
So if you do not know when you wish to acquire your white goods (expense or assets (if you are short of ideas – Kindle, electronic photo album, 600mm lens for your Nikon, Canondale cycle,….the list is endless!!). It works, you know how much money you are willing to spend on white goods (ok ok prices have fallen, but dammit the number of things have gone up astronomically have they not?).
This is not a great new concept. Corporate India has to do it – thanks to ‘depreciation’ and sinking fund kind of concepts, but it makes sense to do it in private life too, what say?
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