Making an informed decision: Buying the latest iPhone or mutual funds investing

In India, iPhones have become a symbol of status, generating immense excitement during the launch of the latest series. As per a Reuters report, there was a significant demand for higher-end models like the iPhone 15 Pro and iPhone 15 Pro Max, with waiting times extending into late October.

Approximately 25% of the overall iPhone 15 shipments in India were projected to be iPhone 15 Pro models in the fourth quarter, indicating a growing preference for premium models. The allure of owning the latest iPhone, often priced between Rs 1.35 lakh to Rs 2 lakh, is evident even among Indian celebrities who proudly display their new acquisitions on social media.

However, what if there’s a more financially savvy approach? Consider purchasing the older iPhone model and investing the remaining amount in mutual funds—a choice that may seem unconventional but deserves consideration.

Let’s break down the financial implications:

Assuming two scenarios: 1) Buying the latest iPhone (iPhone 15 Pro Max with 1 TB storage, costing Rs 2 lakh) or 2) Opting for the one generation older iPhone (iPhone 14 Pro Max with 1 TB storage, costing Rs 1.9 lakh), we can see immediate savings of Rs 10,000 by choosing the older version.

As a representative of mutual funds, I have considered the median 3-year rolling returns of the NIFTY 500 Total Returns Index (TRI). Given the typical lifespan of a phone is around 3 years, this period aligns well for comparison.

The median 3-year rolling returns of NIFTY 500 TRI, since inception, stands at 13%. Investing the Rs 10,000 saved from choosing the older iPhone, with an average return of 13% over the next three years, would result in an approximate value of Rs 14,400.

Now, let’s assume you decide to trade your iPhone after three years. According to Cashify calculations, a three-year-old iPhone 12 Pro Max (256 GB storage) in good condition could fetch around Rs 60,000. Factoring in wear and tear, let’s conservatively estimate a resale value of Rs 50,000. This brings the total value after three years to Rs 64,400 (Rs 50,000 + Rs 14,400).

Final thoughts

While the emotional value attached to phones is undeniable, making a purchase that exceeds Rs 50,000 may not always align with sound financial sense. Affordability is key—if you can purchase without a loan and without compromising on essential needs, it might be a justifiable expense.

However, it’s worth noting that investing in appreciating assets, like mutual funds, can provide long-term financial benefits. Ultimately, the choice between the latest iPhone and mutual funds hinges on individual financial goals and priorities. Making informed decisions ensures a balance between fulfilling desires and securing a stable financial future.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.