This template is designed to help you calculate the desired annualized return and chances of success based on your investment preferences. You can input the following key variables, and the template will provide you with insightful output for decision-making.

 Inputs:

1. Gear Level (1 to 6): 

• • Gear 6 | 100% Equity, 0% Debt | Aggressive
  • Gear 5 | 80% Equity, 20% Debt | Moderate to Aggressive
  • Gear 4 | 60% Equity, 40% Debt | Moderate
  • Gear 3 | 40% Equity, 60% Debt | Conservative to Moderate
  • Gear 2 | 20% Equity, 80% Debt | Conservative
  •  Gear 1 | 0% Equity, 100% Debt | Ultra-Conservative                                                                                         

The gear level corresponds to your desired equity exposure in the portfolio, with Gear 6 being the most aggressive (100% equity exposure) and Gear 1 being the most conservative (0% equity, fully debt-based).

2. Investment Horizon (1, 3, 5, 10):

The investment horizon defines the time period for your investment in years. You can select from the following time periods:

·       1 Year

·       3 Years

·       5 Years

·       10 Years

3. Investment Amount: Enter the amount of money you are planning to invest.

4. Expected Amount: Input your desired amount at the end of your investment horizon. The template will use this information to calculate the expected annualized return and the chances of success.                                                                                                                                              

Outputs:                                                                                                                                              

1. Desired Annualized Return (%): The annualized return is calculated based on the desired amount and the investment amount across the selected investment horizon. It reflects the rate of return required each year to reach your desired amount at the end of the investment period. The formula used for this calculation is:

Desired Annualized Return = (Desired Amount / Investment Amount) ^ (1 / Investment Horizon) – 1

2. Chances of Success: The chances of success are calculated using historical return data from the Sensex (as a proxy for equity) and FD returns (for debt). For each investment horizon (1, 3, 5, or 10 years), there is a table of historical return data for each gear level (1 to 6). The returns are arranged in ascending order to create a percentile ranking system.

To calculate the chances of success:

·       The template matches your desired return to the relevant historical data series based on your chosen investment horizon and gear level.

·       It then calculates the percentile ranking of your desired return in that series.

·       The percentile value represents your chances of success (i.e., the probability that your desired return is achievable based on historical data).

 Data Assumptions:

Equity Returns: The Sensex is used as a proxy for historical equity returns.

Debt Returns: FD (Fixed Deposit) returns are used as a proxy for debt returns.

These proxies allow the model to simulate historical performance and give you a probabilistic assessment of your desired returns.

 How to Use:

1. Input Selection:

·       Select your gear level based on the equity exposure you are comfortable with.

·       Choose the desired investment horizon.

·       Enter your investment amount and the desired amount.

2. Review the Output:

·       The desired annualized return is automatically calculated.

·       The chances of success are also displayed, giving you an idea of how realistic your expectations are based on historical performance.