Hi

Most of us buy medicines regularly from the pharmacy close to our homes and the quantum of purchase is higher, if we have a sick person or aged parents, who by age take medicines for various ailments.

Now we have an option to save some money and it could work out to as high as 20%. This is how it works.

Medicines from the pharmacy nearby has the following advantages.

a. you can order medicines over phone.

b. Door delivery of medicines.

c. Some people also offer credit in the sense that you pay the bill once a month, like I do.

d. Flexibility with return of medicines, in case of change by the doctor.

Let us assume that one spends Rs 2000 per month on medicines every month and is purchased on cash and door delivered.

For a period of 5 years, the total expenses on Medicines work out to RS Rs. 1,20,000

Many of you are aware that Medplus offers the same facility to buy medicines online and offers discount as below

a. 10% upto Rs 1000 and 15% if the bill is above 1000.

b. Door delivery options available, if you upload the prescription or show on delivery.

c. You can place order on your mobile anywhere on the go or using a computer or Ipad.

Scenario 1

In our example the purchase per month is 2000 and hence you get a discount of 15% and hence you pay only 1700. This for a period of 5 years works out to 1,02,00.

A savings of 18000 or 15%.

Scenario 2

The savings you make of Rs 300 everyday, let us assume, that it is invested in a SIP in a debt fund. ( I have considered a Monthly Income Plan) For a period of 5 years from 1 April 11 to Mach 2016,

The total invested amount is 18,000 and the current value is 23,074. The debt fund has given a return of 10.19% CAGR.

You will now see that your return is not 15% but 19.22%

Scenario 3

Instead of paying cash, let us assume that one pays by credit card.

a. The first installment of Rs 1700, which is not paid is invested in a FD for 5 years, at 7.5% per annum compounding quarterly.

This will give a return of 764

b. The second installment is used to pay the credit card bill of the 1st month and hence there is no delay, no extra interest or charges.

c. IN the process, you transact for 5 years, 1700 per month which is 1,02,000.

Many credit card companies offer you a reward of 35 paise per 100 spent and you will earn a cash reward of 357.

d. The SIP grows to 23,074 in the previous scenario. Therefore the total savings is

23,074 +764 +357=24,195

Now the savings works out to 20.165% or one percentage point higher.

Limitations

a. One needs to be extremely careful with managing credit card in scenario 3.

b. Default on payment might lead to higher interest charges which will offset the savings.

c. Past performance of MIP may or may not be achieved consistently in future

d. Return of medicines to Medplus is a disadvantage.

e. More importantly, this will be valid as long as Medplus offers discount.

If you are disciplined you can make money in this method. Exercise care and your discretion on availing this offer.

For any clarifications, please feel free to contact me

varadharajan

ckar.vsv@gmail.com

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