It looks like you're using an old web browser. To get the most out of the site and to ensure guides display correctly, we suggest upgrading your browser now. Download the latest:

Welcome to the MSE Forums

We're home to a fantastic community of MoneySavers but anyone can post. Please exercise caution & report spam, illegal, offensive or libellous posts/messages: click "report" or email forumteam@. Skimlinks & other affiliated links are turned on

Search
• FIRST POST
• donmaico
• By donmaico 7th Jan 18, 11:34 AM
• 313Posts
• 38Thanks
donmaico
Given 3% annual inflation and an interest rate of 1.5%? I know its impossible to predict what inflation rates will be or, for that matter, interest rates but there must be an online calculator one can use purely for academic purposes but I just can't find one
Argentine by birth,English by nature
Page 1
• jimjames
• By jimjames 7th Jan 18, 11:45 AM
• 12,649 Posts
• 11,312 Thanks
jimjames
If you put in a spreadsheet that it will drop by 1.5% per year then you'll get the result. Or in calculator and keep pressing the = button after each result.

By my calcs after 20 years each £1 would be worth 75p. So £20k would be worth £15k.

That's the reason people invest rather than save over the long term
Remember the saying: if it looks too good to be true it almost certainly is.
• Bravepants
• 7th Jan 18, 11:51 AM
• 402 Posts
• 436 Thanks
Bravepants
In a handheld calculator type this:

cash*(1-(interest-inflation))^years

Where * is multiplication operator,
^ is power operator (for example 2^2 is 2 squared, which is 4)
inflation and interest are expressed as decimal rather than percentages, e.g. 1.5% is 0.015...3% is 0.03. Just divide the percentage by 100.

So your 20 year example for £20,000 would be:

20000*(1-0.015)^20

= £14782
• donmaico
• By donmaico 7th Jan 18, 1:24 PM
• 313 Posts
• 38 Thanks
donmaico
If you put in a spreadsheet that it will drop by 1.5% per year then you'll get the result. Or in calculator and keep pressing the = button after each result.

By my calcs after 20 years each £1 would be worth 75p. So £20k would be worth £15k.

That's the reason people invest rather than save over the long term
Originally posted by jimjames
Yes, indeed and I do have some investments. My FI reckons I should have 50/50 cash/investment. At the moment it stands at 66/34 so I am wondering whether to increase the investment side but given the current uncertainty re the economy, I am somewhat hesitant.On top of that my "cautious" investment( 5 funds) whilst they have over a 5 year period grown y by between 7-9%.Since I took them out 7months ago they have dropped to about 2-3% which isn't exactly ideal. Then again they could well pick up again so now might be a good time to put in some extra funds in the form of small lump sums.
Argentine by birth,English by nature
• donmaico
• By donmaico 7th Jan 18, 1:40 PM
• 313 Posts
• 38 Thanks
donmaico
In a handheld calculator type this:

cash*(1-(interest-inflation))^years

Where * is multiplication operator,
^ is power operator (for example 2^2 is 2 squared, which is 4)
inflation and interest are expressed as decimal rather than percentages, e.g. 1.5% is 0.015...3% is 0.03. Just divide the percentage by 100.

So your 20 year example for £20,000 would be:

20000*(1-0.015)^20

= £14782
Originally posted by Bravepants
Mindboggling( Long time since i have done any form of maths).Do you subtract .015 from 1 then multiply by 20000 which gives 19700.How do i get to 14782? (says he absolutely bewildered)
Jims method may not be as accurate but it is a heck of a lot simpler
Last edited by donmaico; 07-01-2018 at 1:44 PM.
Argentine by birth,English by nature
• firestone
• 7th Jan 18, 1:57 PM
• 246 Posts
• 106 Thanks
firestone
Given 3% annual inflation and an interest rate of 1.5%? I know its impossible to predict what inflation rates will be or, for that matter, interest rates but there must be an online calculator one can use purely for academic purposes but I just can't find one
Originally posted by donmaico
A quick search found lump sum calculators that while not UK should work for what you want and you can add inflation/interest rates and duration one is calculatorsoup -investor inflation calculator or Lump sum calculator - capital solutions Gurgaon
• AnotherJoe
• 7th Jan 18, 2:24 PM
• 9,605 Posts
• 10,681 Thanks
AnotherJoe
Yes, indeed and I do have some investments. My FI reckons I should have 50/50 cash/investment. At the moment it stands at 66/34 so I am wondering whether to increase the investment side but given the current uncertainty re the economy, I am somewhat hesitant.On top of that my "cautious" investment( 5 funds) whilst they have over a 5 year period grown y by between 7-9%.Since I took them out 7months ago they have dropped to about 2-3% which isn't exactly ideal. Then again they could well pick up again so now might be a good time to put in some extra funds in the form of small lump sums.
Originally posted by donmaico

Anyway, 50/50 seems very cautious. Is that because you are cautious or the FI is cautious or ..... ?

Also, you say !!!8220;given the current uncertainty re the economy!!!8221;
First , there!!!8217;s always uncertainty not just about the economy but everything, amd second which economy? The wold economy? U.K.? Somewhere else ?
• Mchambers
• 7th Jan 18, 2:27 PM
• 988 Posts
• 308 Thanks
Mchambers
OP.....How long is a piece of string ?
• ruperts
• By ruperts 7th Jan 18, 2:31 PM
• 717 Posts
• 1,179 Thanks
ruperts
1/1.015^20*20000=14849

Basically 1.015^20 gives you compound interest of 1.5% over 20 periods (years in this case)

1/1.015^20 gives you the reverse of that.

Multiply by 20,000 because that!!!8217;s how much you!!!8217;ve got now.
Last edited by ruperts; 07-01-2018 at 2:33 PM.
• jimjames
• By jimjames 7th Jan 18, 3:31 PM
• 12,649 Posts
• 11,312 Thanks
jimjames
Jims method may not be as accurate but it is a heck of a lot simpler
Originally posted by donmaico
It's just as accurate I'd just shortened the number and also taken year 1 as £1. Calculation comes out at exactly the same £14782 if your run it

Basically multiple by 0.985 for every year you want to account for
Remember the saying: if it looks too good to be true it almost certainly is.
• donmaico
• By donmaico 7th Jan 18, 4:31 PM
• 313 Posts
• 38 Thanks
donmaico

Anyway, 50/50 seems very cautious. Is that because you are cautious or the FI is cautious or ..... ?

Also, you say “given the current uncertainty re the economy
First , there’s always uncertainty not just about the economy but everything, amd second which economy? The wold economy? U.K.? Somewhere else ?
Originally posted by AnotherJoe
Apologies I meant FA , financial adviser

UK mainly,(although there is a global element),bonds, securities,passive funds,properties 3,20-60% shares . My FA seemed to think Brexit is a very bad thing, particularly the hard version. I would tend to agree with him although obviously, not from his perspective as I have little or no understanding of how businesses or investment funds work.Still, next time I see him he may well suggest changing the portfolio and look abroad rather like John Redwood did with his clients
Argentine by birth,English by nature
• donmaico
• By donmaico 7th Jan 18, 4:33 PM
• 313 Posts
• 38 Thanks
donmaico
OP.....How long is a piece of string ?
Originally posted by Mchambers
I have sodding great ball of the stuff i use for gardening
Argentine by birth,English by nature
• Bravepants
• 7th Jan 18, 6:37 PM
• 402 Posts
• 436 Thanks
Bravepants
Mindboggling( Long time since i have done any form of maths).Do you subtract .015 from 1 then multiply by 20000 which gives 19700.How do i get to 14782? (says he absolutely bewildered)
Jims method may not be as accurate but it is a heck of a lot simpler
Originally posted by donmaico
You do the power first as it has higher precedence. The power is just the repetition of a multiplication. You do one multiplication for each year, hence ^20.

So X*X*X*X*X*X*X*X*X*X is X^10. Each year of inflation (or interest) is mulitplied by the previous years result.

There are simpler methods as pointed out, but you have to know your interest rate/inflation value first to simplify. The method I presented was a general form so you can plug in interest rate and inflation on the fly.
• donmaico
• By donmaico 8th Jan 18, 12:31 AM
• 313 Posts
• 38 Thanks
donmaico
You do the power first as it has higher precedence. The power is just the repetition of a multiplication. You do one multiplication for each year, hence ^20.

So X*X*X*X*X*X*X*X*X*X is X^10. Each year of inflation (or interest) is mulitplied by the previous years result.

There are simpler methods as pointed out, but you have to know your interest rate/inflation value first to simplify. The method I presented was a general form so you can plug in interest rate and inflation on the fly.
Originally posted by Bravepants
I'll get my head round it eventually
Argentine by birth,English by nature
• AnotherJoe
• 8th Jan 18, 8:50 AM
• 9,605 Posts
• 10,681 Thanks
AnotherJoe
Apologies I meant FA , financial adviser

UK mainly,(although there is a global element),bonds, securities,passive funds,properties 3,20-60% shares . My FA seemed to think Brexit is a very bad thing, particularly the hard version. I would tend to agree with him although obviously, not from his perspective as I have little or no understanding of how businesses or investment funds work.Still, next time I see him he may well suggest changing the portfolio and look abroad rather like John Redwood did with his clients
Originally posted by donmaico

Brexit is an irrelevance unless most of your funds are in the U.K. which is horrendously risky. Irrespective of Brexit why would you have more than a small % of your funds in U.K. companies? You!!!8217;ll find most people here have the minority of their funds in the U.K.

I!!!8217;d be worried that oniy now and only because of Brexit are you / your FA looking at being globally invested. If you are oniy or mostly invested in the U.K. you are missing on huge areas of the economy and industries

I also think you!!!8217;d have almost zero FAs suggesting you have 50/50 investments cash and then of that 50% investments, a high % in bonds. One at least of you at least is incredibly cautious to a point that is counterproductive.

How long are you 8ntending to hold these investments for.
Last edited by AnotherJoe; 08-01-2018 at 8:53 AM.
• donmaico
• By donmaico 8th Jan 18, 10:43 AM
• 313 Posts
• 38 Thanks
donmaico
Brexit is an irrelevance unless most of your funds are in the U.K. which is horrendously risky. Irrespective of Brexit why would you have more than a small % of your funds in U.K. companies? You!!!8217;ll find most people here have the minority of their funds in the U.K.

I!!!8217;d be worried that oniy now and only because of Brexit are you / your FA looking at being globally invested. If you are oniy or mostly invested in the U.K. you are missing on huge areas of the economy and industries

I also think you!!!8217;d have almost zero FAs suggesting you have 50/50 investments cash and then of that 50% investments, a high % in bonds. One at least of you at least is incredibly cautious to a point that is counterproductive.

How long are you 8ntending to hold these investments for.
Originally posted by AnotherJoe
Five more years of making regular investments and then the idea is to withdraw an annual income of about 4-5%.
My original intention was to put virtually all my savings into an investment pot from which I could draw that income but the FA suggested it would be more prudent to go 50/50.
I had wanted to do something similar to what a mate of mine did some years ago when he went to Santander and asked them if they could provide 5% from 200k investment and so far he has been quite happy.He is retired and has adequate pensions as well .I think the resulting 10k is his holiday money
I was considering adding a rather more volatile fund such as Janus Henderson Global tech into the mix.I used to have an ISA in that fund which I took just before the tech bubble burst so I sold it as I didn't want to lose too much.Now I see it has rocketed since then and I am confused as to why Trustnet only gives it three crowns. There are probably better tech funds out there but given the rise of AI it seems to me there is an ongoing future for those kinds of funds.
.Maybe my FA was responding to my rather less cavalier nature these days.Other funds I held in the past: were Fidelity European, Invesco perpetual European (and smaller companies) and Schroder Midcap 250 all of which he considered too volatile. All the ones he chose instead had reasonable "cautious" records with 5 crowns(stars) apiece, just not for the past year which I guess is sod's law as one can only go by past performance.
Last edited by donmaico; 08-01-2018 at 12:52 PM.
Argentine by birth,English by nature
• Morphoton
• 8th Jan 18, 3:00 PM
• 83 Posts
• 70 Thanks
Morphoton
If anyone does not own a Scientific Calculator to do Power and Root calculations, an online version can be found in the link below:
http://www.calculator.net/scientific-calculator.html
• OldMusicGuy
• 8th Jan 18, 3:23 PM
• 397 Posts
• 780 Thanks
OldMusicGuy
You might find this easier to use than a spreadsheet:

https://www.vertex42.com/Calculators/inflation-calculator.html
• donmaico
• By donmaico 9th Jan 18, 12:40 PM
• 313 Posts
• 38 Thanks
donmaico
Looking at my investment portfolio it would appear that I have 35% weighting in stocks, 51% in bonds and the rest in cash or "other".
As far as the stocks go - 35% in the UK,12% Europe, 32% in the USA Canada and the rest in Asia
Argentine by birth,English by nature