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magic of compound interest
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Magic of Compound Interest

Financial Awareness 0
magic of compound interest
Benefits of Compound Interest and how it works

“Compound interest is the 8th wonder of the world. He who understands it earns it and he who doesn’t pays it.” – Albert Einstein

Time is your friend, impulse is your enemy. Take advantage of compound interest and don’t be captivated by the siren song of the market – Warren Buffet

Really compound interest is the greatest mathematical discoveries of all time, one who understand it know the magic compound interest can create over a period of time, luckily it is the part of investment world and it works towards the benefit of investor.

In simplest word your interest of capital is also earning income again in terms of interest, the value of investment will keep increasing and value of money will keep multiplying over the time, three key ingredient are required for the magic of compound interest (a) Rate, (b) Time and (c) Capital, where time is most important factor but in reality normally many people don’t give it much importance to the Time what it actually deserve.

To make you clarify the power of compounding and importance of Time as the key factor, we would like to help of Rule 15-15-15 of the investment world

 

What is Rule 15-15-15 ?

If you invest Rs 15000/monthly at an assumed rate 15% compounded yearly (normally Term CAGR is used) for 15 years, maturity will be Rs 92 lakhs , Getting Rs 92 lakhs with a investment of Rs 27 lakh only that too contribution made monthly is really a good deal , because a RD of 9% at same contribution of Rs 15000/month for 15 years would become Rs 48 lakhs only

 

Now See the Rule 15-15-30

If you invest Rs 15000/monthly at an assumed rate 15% compounded  yearly (normally Term CAGR is used) for 30 years , maturity will be  Rs 8.46 Crore, yes you hear it right it will Rs 8.46 Crore, Now this is the real magic we only doubled the time and result is almost 9 times higher

 

Conclusion

So, if you really want to generate magical returns with the help of Compound interest go for long term approach , give maximum time to your investment one way to give maximum time is to start as early as possible , because time is the best fund manager

Start your Investment as early as possible with Systematic Investment Route (Known as SIP), stay for long term don’t follow the so called market news and tips, Increase your contribution whenever it is possible, Withdraw when it is extremely important because when you withdraw your money you also loose potential money which your withdrawn money can earn if they remain invested.

Make Long Term Goal, Start Early, Remain Invested for Long Term and Let Compound Interest shower the magical return on your Investment

 

 

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New Debt Funds Category in India -After SEBI Categorization of Mutual Fund

Mutual Funds 0

After SEBI’s Categorization and Rationalization of Mutual Fund there are 16 types of Debt mutual Fund in India lets understand what kind of assets they will invest

Type of Debt Mutual Fund
New Debt Funds Category in India -After SEBI Categorization

Overnight Funds: Open Ended Debt Scheme seeks to generate returns by investing in debt and money market instruments with overnight maturity, means securities with a maturity of one day

 

Liquid Fund: Open Ended Debt Scheme seeks to generate income with good liquidity by investing in debt and money market securities with a maturity of up to 91 days

 

Ultra Short Duration Funds: Open Ended Ultra-Short Term Debt Schemes seeks to generate income with reasonable liquidity by investing in instruments with a maturity between three months and six months

 

Low duration Fund: Open Ended Debt Scheme seeks to generate income by investing in primarily highly rated debt securities with a maturity between 6 months and 12 months

 

Money market funds: Open-Ended Debt Schemes seeks to generate income by investing in cash equivalent securities of money market with a maturity of up to one year.

 

Short Duration Funds: Open-Ended Debt Schemes seeks to generate stable returns by investing in fixed Income Securities with Maturity duration between one year and three years.

 

Medium duration Funds:  Open Ended Debt Schemes seeks to generate regular income and capital appreciation by predominantly investing in a portfolio of debt securities with a duration between three years and four years.

 

Medium to Long Duration Funds:  Open-Ended Debt Schemes seeks to provide investors an opportunity to generate regular income through investments in debt and money market instruments with a duration between four years and seven years.

 

Long Duration Funds: Open-Ended Debt Schemes seeks to generate regular returns by investing in instruments with a duration of greater than seven years

 

Dynamic bonds:  Open-Ended Debt Schemes seeks to generate returns by investing in debt and money market instruments of across durations.

 

Corporate Bond Funds: Open-Ended Debt Schemes seeks to generate returns by investing predominantly in highest-rated corporate bonds. These schemes should invest at least 80 per cent of total assets in corporate bonds, only in highest-rated instruments

 

Credit Risk Funds: Open-Ended Debt Schemes seeks to provide returns and capital appreciation through investment in highest-rated corporate bonds. They should invest at least 65 per cent in corporate bonds.

 

Banking and PSU Funds: Open-Ended Debt Schemes seeks to generate stable returns by investing (80 per cent of assets) in debt instruments of banks, public sector undertakings and public financial institutions Financial Institutions.

 

Gilt funds: Open-Ended Debt Scheme aims to generate returns by investing in a portfolio of Central/State Government securities of various maturities. These schemes should invest a minimum of 80 per cent of its total assets in G-secs.

 

Gilt Fund with 10-year Constant Duration: Open-Ended Debt Scheme seeks to provide returns to the investors generated through investments predominantly in Government securities issued by the Central Government and/or State Government with a constant maturity of 10 years. These schemes should invest at least 80 per cent of the total assets in G-secs.

 

Floater Funds: Open-Ended Debt Scheme aims to generate regular income through investment in a portfolio comprising substantially of floating rate debt / money market instruments, it may also invest a portion of its net assets in fixed rate debt securities and money market instruments. These schemes will invest at least 65 per cent of the total asses in floating rate instruments.

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5 Signs Indicating your Financial Success

Financial Planning 0

Who doesn’t want a big financial success? But just wanting it is not enough, you must work towards it as well. Many think that it is only through earning good one can achieve financial success. However, your behaviour and attitude towards money also matter significantly. By exercising right money habits, you can very much bring in financial success within your reach. So are you on the path to financial success? To know that, look for the following 5 signs in your attitude towards your money.

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