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Economic Life,Sinking Funds,Amortization and RDs


wealthymatters.comHaving an abundance of material resources and never having to hustle round in the last-minute to find the funds to do what we want to do is a good indicator of wealth.

I first came across the concepts of economic life,sinking fund and amortization as an engineering student.Adapted to our personal finances and business these concepts help us to always have enough money at the right time.

Economic life , a.k.a useful life is the period of actual usefulness of an asset.Beyond this period it is cheaper to replace or scrap the asset than to continue maintaining it.

A sinking fund is a reserve created by periodically setting aside certain sums in an account to replace  an asset in future or to repay a liability.

Amortization refers to spreading an asset’s replacement cost over it’s economic/useful life. Read more of this post

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Mohnish Pabrai


wealthymatters.com

Mohnish Pabrai is an Indian-American businessman and deep value investor.He is the managing partner of the Pabrai Investment Funds, which he founded in 1999.He is also a member of the Young President’s Organization (YPO) and a charter member of The Indus Entrepreneurs (TIE).

Monhnish Pabrai first trained as a computer engineer. He then spent nearly two decades in the tech field.In 1990, he quit his job working as an engineer for Tellabs in Chicago and abandoned his master’s thesis at the Illinois Institute of Technology to launch TransTech, an IT consulting and systems integration company, which he funded with $30,000 from his retirement account and $70,000 from credit cards.His father encouraged him in the endeavour,saying that it was the right thing to do as staying at Tellabs and following the staid boring corporate path was high risk. Starting a business on the other hand was low risk, could give high returns and high adventure. As Monaish was single at the time there were few complications and in the worst case, he would lose everything ,which wasn’t much anyway,and could declare personal bankruptcy and start over. By 1999, Transtech, which had grown to 200 employees and $30 million in revenues, held no thrill. So he sold it. And during the tech boom,he started another company, internet incubator Digital Disrupters, which had a very painful and swift demise due the tightening of capital markets .In 2000, he sold TransTech to Kurt Salmon Associates.During late 1999, with nine other investors contributing $100,000 each,Mohnish started Pabrai Funds with $1,000,000 in assets. Pabrai Funds was modelled on the original “Buffett Partnership.” Read more of this post

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