Category Archives: personal finance

How Long It Takes For Investment To Double

People always want to know how long it would take them to double their investment. Its a curious question because all of us want our money to multiply as soon as possible. So, here’s a simple calculation called Rule of 72, which will help you know how long it takes to double the investment amount.

If we divide 72 by the RoI [annual rate of interest], we get the time period for doubling our money.

For example: If RoI is 9%, then 72/9 = 8. So, it will take 8 years for amount to double at 9% annual interest rate; whatever be the invested amount. Lower the rate, higher the time taken for doubling.

Suppose there is a bull run and RoI is 14%, then 72/14 = 5.14. So, it will take a little over 5 years for the invested amount to double.

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Posted by on November 10, 2012 in business, personal finance


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Sudden Spurt in US Centric MF’s

I am sure you have observed how most fund houses have a tendency to bring out similar sounding products and MFs with similar themes due to intense competition. So, if one AMC announces Top-200 or Top-100 Fund, then all other AMCs will sooner rather than later, come out with a similar scheme. And this trend is repeated across all funds of all sectors & all market caps.

In the same vein, off-late we have had 2-3 MF’s with US centric funds. The first AMC to start the trend was Franklin Templeton. FT India Feeder Franklin US Opportunities fund was launched in Jan’12 with a view to provide capital appreciation by investing in units of Franklin US Opportunities. So, its basically a Fund-of-Funds which taps into US-based equity and equity based securities.

The current NAV of this fund is Rs.10.72 and its 6-monthly high has been Rs.11.4. This means, currently it is giving a return of 7.2%. But how sustainable is that, in this fluctuating market? When the fund was launched, the timing was such that global markets were doing pretty well for that brief period till Apr’12, and that’s when the 6-monthly high was achieved. But as the markets settled lower, the NAV too fell to Rs.10.5.

In the Manager’s report dated 31-May-12, the overview says that “US equity prices fell in May as US investors were focused primarily on the intensifying European sovereign debt/banking crisis, lower growth in China and various U.S. indicators that have recently worsened”.

Historical Performance31 May 2012 

1 Mth

3 Mths

6 Mths


1 Yr

3 Yrs

5 Yrs

10 Yrs

Since Incept


Franklin U.S. Opportunities Fund A(acc) USD—NAV










Russell 3000 Growth Index USD










Whatever be the reason for poor performance, the truth is that in this globalised world, all markets are inter-related. So, the cause-effect ripples are felt everywhere.

The world has not decoupled and equities across the globe still move in tandem although the degrees vary.

Anyhow, a few weeks ago ICICI Prudential US Bluechip Equity Fund was launched with NAV of Rs.10 and as of today its trading at Rs.10.2. Again the objectives are the same, except for the fact that ICICI would be directly investing in US securities, including ADRs/GDRs issued by foreign companies. They, of course, claim that this will give exposure to Indian investors and provide us with an opportunity to gain from US markets growth as the market capitalisation of stocks listed in NYSE is 12 times more than those listed on BSE.

And this week, DSP has launched the DSP BlackRock US Flexible Equity fund and the NFO closes on 31-Jul. This fund is similar to FT fund discussed above, in the sense that, its a fund-of-funds whereby they would be investing in Blackrock Global funds.

Although these funds may provide investors an opportunity to diversify their portfolio, but the benefit to be drawn out of this is doubtful. In the long-run, as and when the Indian rupee recovers and goes back to levels of being less than 50 rupees conversion for each dollar, it will erase the gains. Also, I believe that growth is more sustainable in Indian markets than US markets. So, if we carefully choose a few midcap and smallcap funds, we will definitely get better returns than US centric funds.

Nevertheless, for the optimistic and enthusiastic investors who believe in American growth story, this may be a good opportunity to dive-in. And since the markets have been bearish for a while now, we maybe in for a good bull run and see good upside rallies in the future.

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Posted by on August 1, 2012 in mutual fund, personal finance


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Advantages of Term Plan over Endowment Plan

Recently I bought a Term Plan from Kotak through their online process. The SA was 30 lakh and the yearly premium worked out to be a little over 4500/- for a period of 30 years. When I told my father about this term plan, the first question he asked me was ‘What’s the return benefit on maturity?’ and I had no reply.

Insurance v/s Investment
This is one of the biggest mistakes that we make. We look for maturity benefit while going for an insurance policy. We mix insurance with investment, whereas, we should be separating the two like husk from the grain. We need to understand that investment is a long term plan for multiplying our saved up money so we can sustain our lifestyle without making compromises.

And insurance is a risk mitigation plan, wherein, if the bread winner of the family meets with some unfateful incident then the amount can help the family memebers in his/her absence.

Old Thought v/s New Thought
Our parents and other elderly members from previous generation always push for some Endowment Plan which will benefit us on maturity. But that actually comes back to bite us. Let me try to explain this using an example below.

Endowment Plan v/s Term Plan
LIC has an Endowment Plan called Jeevan Anand. In this plan, for a SA [Sum Assured] of 5 lakh, the premium is 38,000/- per year for 15 years period for a person aged 30. The maturity benefit including bonus is about 7 lakh, if the insured person survives the period.

Now, instead of going for the above plan, lets see how best we can use that amount of 38,000/- and separate investment and insurance.

If we take any Term Plan for SA of 15 lakh [3 times the SA of Endowment Plan] for a term period of 15 years, the premium works out to be only 3,000/- per year . Lets put the remaining amount of 35,000 in a PPF account which is the safest debt instrument. If we continue to pay the said premium and deposit the said amount in PPF, at the end of 15 years when the insured person survives the period, they will have accumulated 10 lakh in the PPF account. Even if we deduct the amount of 45,000 that’s paid as premium of the Term Plan [3,000 x 15 = 45,000], the effective return is about 9.5 lakhs. This is still higher than the maturity benefit of the endowment plan. In case of death, the SA of 15 lakh is given to the nominee, and this is twice the SA of the endowment plan.

Disadvantages of Endowment Plan:
a. very high premium for very low SA
b. very low gains on maturity
c. mis-selling of a bad policy which is neither good as insurance nor good as investment

Advantages of Term Plan:
a. low premium for very high SA
b. the extra money can be invested wisely in some good debt instrument like PPF or can be put in a good index fund
c. the extra money can be used to pay EMIs or can be saved for any other emergencies

Now that term plans can be done online, don’t break sweat over it. We have many options like Kotak’s E-Preferred Term, HDFC’s Click2Protect and ICICI’s iCare.

Some key things to note:
a. go for a high SA of 25-30 lakh, because the premium will not be more than 5-6 thousand. That’s a small amount to pay!
b. make all declarations truthfully, including details of previous insurance policies from other insurers
c. take a medical test if need be, do not hesitate. Its better they take a medical test, so that they don’t cause any problems later in case policy has health related riders for critical illness etc
d. pay your premiums on time, do not default on that
e. advise all near and dear ones to buy a term plan

I just have to explain the above to my father now. But I am sure, he would still not be convinced. Anyways, buy a term plan today and put your mind at ease.

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Investing in NFO

ImageNFO [New Fund Offer] is always deemed as a risk. Everyone advises you to go for an existing MF, rather than invest in a NFO. One of the reasons being that, the existing funds have performance and past results to go by. But in case of NFO, its a big risk.

But then, investment itself is a risk. Even MFs can turn non-profitable if fund managers don’t do their job well. The kind of analysis we do before buying a MF, we can do a similar analysis of the AMC before investing in the NFO.

I have invested in quite a few NFOs, based on the past performance of the AMC who have managed successful MFs. Also, the asset allocation makes a difference too. As in the case of Sundaram Equity Plus fund where 35% was allocated to gold and rest 65% to equity. That made it an interesting assortment and I leapt towards that NFO. It perfromed pretty well and even touched a high of 11.02, which was a real positive.

Another NFO which turned out well for me was SBI Bluechip Fund [D]. It oaid great dividends in its first few years before the slow down. But then I burnt my finger in SBI PSU Fund.

Another point to note is the timing of the NFO. When you invest in a NFO while the market is bearish, then you will earn profits during bull run. But when you invest in a NFO which is launched during a bull run, taking advantage of rising sensex, then its a sham. It takes away the hard earned money as soon as the bull run dies down. This happened to me with Reliance Small Cap Fund [G]. I got the timing totally wrong.

Anyways, that has not deterred me. Just a few days back I went ahead and invested in two more NFOs. One was the IDBI India Top 100 Equity Fund and the other was Taurus Banking & Financial Services Fund.

The simple reason for this step was to take advantage of the situation where banking stocks have been beaten down and with falling sensex I can look to gain during a bull run. I could have also go in for a Banking Fund from any of the AMCs, but the NAV was quite high. For each unit purchased from existing MF, I can have 5 units here. And then, the %gain would be more or less the same, if they invest in similar banking stocks.

All I can say is, do not stay away from NFOs. The NFOs give us a chance to enter the market at a lower cost and more number of units. But do check on the market status since timing is everything.

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Posted by on May 11, 2012 in lifestyle, mutual fund, nfo, personal finance


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Downside Of Investing In Gold

A rush of gold funds and consistent rise in the price of gold has led people to believe that gold is a great investment tool. But there is a downside to gold investment too. And this downside is with reference to physical gold purchase.

Lots of people buy physical gold in the form of ornaments. Their main purpose of buying jewellery, apart from the social need for displaying it, is that it should provide security at times of crisis. And gold loan is a new fad. But what many people don’t consider is that, not many jewellers or goldsmiths buy back jewellery. And that’s a big negative. So, that kills the liquidity factor.

Even if we have a proper certificate or even if the jewellery is purchased from a branded store or a well known jeweller, people refuse to buy it. Small time jewellers just don’t want to touch and pawn brokers downgrade it and give a very low value for it.

So now, what does one do? At times of crisis, you run from pillar to post but no one buys back the jewellery from you, then where’s the security in buying gold?

Investing in gold is a good thing, but make sure that you buy gold coins. Its much easier to sell away a coin than a jewellery piece. The reason for this is, the ornament sold may not be a design that’s in vogue. The goldsmith may have to melt the jewellery and make different ornaments out of it, so that leads to wastage. Hence, gold coin is preferred.

Gold fund is another option. Since its a fund, you can sell it anytime and get back cash. Even if you sell it within 12 months of purchasing it, you will only suffer an exit load of 1-2%, but at least the liquidity factor remains.

The last option is of course gold loan, in case you want that piece of jewellery back! But if you need that jewellery and love it so much, you would not pawn it in the first place.

Any how, gold investment should be only 10-15% of the portfolio. So, invest wisely in gold.


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LIC Jeevan Vriddhi

I was just looking out for some insurance plans, Term Policies to be more specific. And then, I came across this new plan from LIC called Jeevan Vriddhi.

Term plans usually don’t come with return benefits, but this plan does. And that’s what struck me about it.

Salient features of this policy are:
a. its a single premium policy wherein the minimum amount is Rs.30,000.00 and no limit on maximum amount
b. sum assured is 5 times the premium
c. the term is fixed at 10 years
d. age of entry is between 8 & 50
e. policy can be surrendered after 1 year

Other benefits:
a. minimum return is almost 90% of the premium amount, if surrendered after a year
b. between premium amount of Rs.50,000.00 and Rs.99,000.00; there is an increase in guaranteed sum assured by 1.25%
c. beyond premium amount of Rs.1,00,000.00; there is an increase in guaranteed sum assured by 3%
d. policy ie eligible for section 80c exemptions in IT
e. you can avail loans at 10.25% against this policy

There are very few policies that give return benefit and sum assured. Its specially beneficial for someone in their late 40’s who want to take an insurance policy with minimum fuss and maximum gains. Even for people in their 30’s, this is a good enough plan where return of interest is about 7-8%. We can get the benefit of protected investment as well as life insurance. And since its single premium, there is no need to bother about tracking the due dates!

Update 1 on 22-Mar: I just called my insurance agent and have created a proposal for a single premium of Rs.60,000/-. So, the SA is about Rs.3,00,000/-. That’s when it struck me that the premium was much lesser than what I was paying for a Jeevan Saral plan [yearly premium of more than Rs.6,000/- for 10 years and SA of Rs.1,50,000.00], and the SA was twice that of Jeevan Saral.


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Shriram Transport Finance NCD 2011

The liquidity in the market is decreasing quarter after quarter. Hence, companies are coming up with bonds and non-convertible debentures(NCD) to raise money. After applying for SBI bonds and PFC Infrastructure bonds, I am again contemplating investing in this. Here I present more details as per my research:

  1. Two options to begin with : Option 1 –> 3 years & Option 2 –> 5 years
  2. For Option 1 : Investment below 5 lakhs, Interest = 11.35%
  3. For Option 2 : Investment below 5 lakhs, Interest = 11.60%
  4. For Option 1 : Investment above 5 lakhs, Interest = 11.10%
  5. e. For Option 2 : Investment above 5 lakhs, Interest = 11.30%

Some important things to note:

a. If the NCD is in demat form then no TDS is deducted, else TDS will be deducted at the time of encashing/redemption

b. Each NCD is valued at Rs.1000/-

c. Minimum invetsment amount is Rs.10000/- (10 NCDs will be issued)

d. Put and call options available. And NCDs can be traded using demat and trading account

e. NRI’s cannot apply

Considering the above, and the good interest rate in the offering, an amount of Rs.25000/- and above would be a good investment option. And this can be a route preferred over traditional FDs.

Issue opens on 27th June and closes on 9th July. Since its first-come-first-serve basis, better earlier than later. If interest rates fall further, the value of the NCD will rise further.

Update-1: Indiabulls has the option of applying for this NCD online. Maybe other demat/trading accounts also have this facility. Plz check once before running after the paper based form.


Update-3: My amount was refunded although I had applied on the first day. I guess retail investors were not given much consideration.

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