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Among the many methods available to safeguard ones investment from stock market volatility, the most popular is to invest a fixed amount at periodic interval irrespective of market conditions. This is of course known in India as systematic investment plan or SIP.

One could add an aspect of market timing by gauging returns with respect to a target portfolio with a pre-determined return. If after a specified period (usually a month as in SIP) the actual portfolio is less (more) than the target portfolio, the investor increases (decreases) the investment amount. Thus this is equivalent to investing more on market lows and less on market highs. The investor will have to fix a target return and nominal investment with which the target portfolio is calculated. A minimum investment (to be made when portfolio exceeds target) and a maximum investment (to be made when portfolio falls short) also need to specified. This approach is known as value averaging investment plan or VIP.  You can read more about this here. read more

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Scenario 1: A certified (certifiable?) financial planner tells his client: “do you want to invest in direct mutual funds? They may give better returns but did you know that this is only suitable for those who can choose and manage their funds on their own? You don’t need to take this burden on yourself, let me (continue to) do this for you”. (I can of course get a fee from you for investment advice alone but I want trail commissions from your investments too. Besides, if you go ‘direct’ I have to get the MF fund portfolio history from you and not from the AMC. This is too much of a pain for me analyze and advice). Bracketed sentence thought but not spoken. read more

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There are times when we have a large sum of money to be spent, not in one-shot, but over the course of a few years. Retirement of course is the most obvious and most complicated example wherein the corpus has to last from a few years to decades. There can other situations: a person who works in a salaried job wanting to start a business may desire to use a corpus to guarantee certain expenses (eg. school or college expenses) for a certain number of years until his business picks up. An expecting mother who may/will not be working for the next few years, a person who is working in a shaky job may all have such requirements. read more

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I strongly believe, financial literacy is best promoted by non-professionals. Kirti Desai who runs Bemoneyaware typifies this belief.  Pleasantly surprised to learn so does Silki Gargh, a telecom professional from Varanasi, who runs loancalculators.She reviews loan products, creates calculators like SBI Maxgain Home Loan Calculator and writes on technology, computer security, online threats and virus attacks.The website is her attempt to explore, learn and share. This post is written by her. read more

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He never said it!  Said what?

  • “Compound interest is the eighth wonder of the world. He who understands it, earns it ... he who doesn't ... pays it.”
  • “The most powerful force in the universe is compound interest”
  • "Compounding is mankind's greatest invention because it allows for the reliable, systematic accumulation of wealth."

Einstein's discoveries influence every  (believe me, every) conceivable aspect of human existence. He however never said anything about compounding. There is no record of it. These are yarns spun by financial gurus to catch peoples attention. To lend credibility to their claims. Over time these claims have compounded to different forms! Do you need a genius to sell commonsense? Unfortunately yes! read more