Planning to buy iPhone X? You may want to spend that money like Warren Buffett instead

The much awaited iPhone X was unveiled yesterday at an eye popping price of Rs 1 lakh for the Indian market. That is a bit steep even by Apple standards - yes it unlocks the phone using facial recognition and you can send "Animogis", but do you know the real cost i.e. the opportunity cost of buying it? Wouldn't you rather use the same amount to buy something which would yield more money? That is invest it.

What legendary investor Warren Buffett did may give you a clue. While Buffett, reportedly, still does not own an iPhone but his company Berkshire Hathaway has doubled its shareholding in Apple (over the last one year), the company that makes iPhones. Clearly, Buffett hopes to make his money off your money.

Berkshire Hathaway started buying shares of Apple in mid-2016 and by January 2017 had doubled its stake to 133 million shares equalling about 2.5% of the tech giant's shares. Since the start of 2017, Apple's stock price has sky-rocketed 71%. Consequently, the value of Buffett's investments jumped from $15 billion to more than $21 billion.

Let us take a look at what Rs 1 lakh would grow to if you invested it. If you haven't made your tax saving investments for this financial year then this is the first priority. If you invested Rs 1 lakh in a tax saving financial instrument under section 80C of the Income Tax Act you could straightaway save a maximum of 30% of this amount (if you are in the highest tax bracket) i.e. your tax outgo would be cut by Rs 30,000. What's more you would be getting returns on your investment too.

We have calculated how much Rs 1 lakh would grow for three different types of investors for different tenures - 2, 5, and 10 years. The three different types of investors we have assumed are:
a) A conservative investor looking at debt investment options
b) A moderate investor looking at hybrid funds
c) An aggressive investor willing to take a risk by investing in equity


*Rate of Return assumed, Returns are compounded annually; Figures in Rupees
In the above calculations, we are assuming annual compounding. Also, of course, the final investment values depend on the rate of return being maintained uninterrupted.

Apart from that, if you are planning to buy the iPhone X on EMIs, there can be different interest rates charged by different banks depending on the tenure selected by you.

If you choose a 12-month plan at the interest rate of 13% per annum, the total interest payable by you for a Rs 1 lakh iPhone will be approximately around Rs 7,000. For the longer tenure, say for 24 months, the total interest payable will be approximately is Rs 12,000. Currently, if you buy a iPhone 7 plus from Amazon via EMI route then ICICI bank is charging 13% per annum interest for a 12-month payment plan and 15% for a 24-month payment plan.

This means that the real cost of buying the iPhone X on EMIs would effectively be Rs 1 lakh plus Rs 7000 to Rs 12000.

If you absolutely cannot do without the new iPhone X, then keep in mind that high-end electronic gadgets depreciate the fastest. In a few years' time, this model would be half obsolete. Ponder what Buffett has to say, the man does know a thing or two about making money: "If you buy things you do not need, soon you will have to sell things you need."