Smartphones are the latest addition to our human body. Now, biologists may disagree with the statement but just imagine living a day without your phone. Kind of impossible, Right? Almost everything from waking up (Alarm Clock), eating food, socializing, posting memes to sleeping (Sleep tracker); happens here on our phone. And, that’s why I want to talk about why it is better to buy a smartphone less than ₹20,000; than a phone worth more than that. Now I am in no way a tech reviewer, so this article is more about ‘why to buy‘ than ‘what to buy‘. It is more about ROI & returns, and less about GBs & Pixels. And as I have always said,
If you compare any ₹20,000 phone with a ₹40,000 one; both can run exactly the same number of apps that you require to earn or save money. And “The golden rule is this: If it’s not helping you get paid – Delete it.”
We all know that on average, a person uses his/her phone for about 3 years. Now, let’s take the extreme case that the guy buying the ₹40,000 smartphone will be actually smart & use it for at least 4 years and keeping that in mind let’s take 6 scenarios:
Scenario 1: Bought the ₹40,000 phone
When I say a ₹40,000 phone, that’s just for the headline. What I actually mean is any smartphone worth more than ₹20,000. In India, resale value of a smartphone is less than 50% of its actual value. For this scenario, let’s assume that the resale value of the phone is exactly 50% and Mr. A has bought the phone.
| Value Now | Value after 4 years | Return |
| ₹40,000 | ₹20,000 | -20,000 |
Bought a ₹20,000 phone and invested rest
Again, when I say a ₹20,000 phone, what I actually mean is any phone worth less than ₹20,000. Now, let’s choose 5 ways the rest ₹20,000 could be invested (ignoring inflation):
Scenario 2: Bank Account
Mr. B decided to buy a ₹20,000 smartphone and keep the other ₹20,000 in a bank account. With an average yearly return of 3.5%
| Value Now | Value after 4 years | Return |
| ₹40,000 | ₹32,950 (10,000 phone value + 22,950 bank balance) | -7050 |
Scenario 3: Liquid Fund
Mr. C also decided to buy the ₹20,000 one and invest the rest in an instant redemption liquid fund. With an average yearly return of 7%
| Value Now | Value after 4 years | Return |
| ₹40,000 | ₹36,216 (10,000 phone value + 26,216 liquid fund balance) | -3784 |
Scenario 4: Debt Fund
Mr. D decided to buy ₹20,000 phone and invest the rest ₹20,000 in a debt fund. With an average yearly return of 7.5%
| Value Now | Value after 4 years | Return |
| ₹40,000 | ₹36,709 (10,000 phone value + 26,709 debt fund balance) | -3291 |
Scenario 5: Gold
Mr. E decided to buy a ₹20,000 phone and invest the rest in gold. Average yearly return of gold is 10.5%
| Value Now | Value after 4 years | Return |
| ₹40,000 | ₹39,818 (10,000 phone value + 29,818 gold value) | -182 |
Scenario 6: Stock Market
Mr. F decided to buy a ₹20,000 phone and invest the rest in a stock market index fund or ETF. A stock market index has an average yearly return of 13%
| Value Now | Value after 4 years | Return |
| ₹40,000 | ₹42,609 (10,000 phone value + 32,609 index fund balance) | +2609 |
So just by buying a ₹20,000 phone instead of a ₹40,000 phone and investing the rest in a stock market index fund or ETF, Mr. F didn’t lose a single penny instead made ₹2609 extra. All after ignoring the extra money Mr. F can earn by using that phone.
Now, for some that may seem a little less but when you see what Mr. A, B, C, D, E & F would have after 10 or 20 years you will be amazed. We are very sure that after 10 years both the ₹40,000 & ₹20,000 phone is worth absolutely nothing. But the value of that ₹20,000 invested after 10 years would be:
- Mr. A: ₹0 (Bought 40k phone, invested nothing.)
- Mr. B: ₹28,212
- Mr. C: ₹39,343
- Mr. D: ₹41,220
- Mr. E: ₹54,281
- Mr. F: ₹67,891
Just after a decade, Mr. F will have ₹67,000 more than Mr. A by doing nothing. So basically if you couldn’t stop yourself from buying an expensive garbage, you will miss out on more than ₹60,000. Now things get really interesting when we increase the time horizon from 10 to 20 years and let compound interest show its magic. As Albert Einstein said, “Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.” Let’s look at what happens to that same ₹20,000 after 20 years:
- Mr. A: ₹0 (Bought 40k phone, invested nothing.)
- Mr. B: ₹39,796
- Mr. C: ₹77,394
- Mr. D: ₹84,957
- Mr. E: ₹1,47,325
- Mr. F: ₹2,30,462
Just after 20 years, that same ₹20,000 one time investment is now worth more than ₹2,00,000. Mr. F now has 10X more than Mr. A. Just a simple decision of buying a phone less than ₹20,000; could help you save 10X more than your friend who decides to let short term happiness win over long term gain. Just because it’s a smartphone, it doesn’t mean you need to be dumb; be smarter than your smartphone. And as Warren Buffett would say,
“Rule No. 1: Never lose money.
Rule No. 2: Never forget rule No. 1.”
As always, never forget our life mantra: Save Invest Repeat. Talk to you on Twitter – @InvestRepeat. Also, you can join my private Telegram channel (Username: InvestRepeat).
Your man,
SIR
