Mutual fund investments are subject to market risk! Haven’t we heard that one before?! If we wish to analyze the performance of a mutual fund, we should know how to evaluate returns and how to evaluate volatility. Volatility, not risk. Risk pertains to your financial goal. Volatility pertains to the instrument. There are many ways to…
Continue reading →Many investors would like to park their lump sum in tax-free bonds, and invest the interest paid out each year in mutual funds, stocks or PPF. What if the lump sum was invested in a mutual fund/stocks instead of these bonds? Which option would fetch the investor more returns? Here is a calculator to evaluate…
Continue reading →Do not invest in tax free bonds if your retirement is a long way off. Even if are retiring soon, do not invest in these unless you have thoroughly evaluated your options. There, I said it. That is the message of this post. I have been wanting to say that for a long time. Ever…
Continue reading →The importance of a solid retirement plan cannot be stressed enough. The importance of ‘stress testing’ a retirement plan also cannot be stressed enough! Here is an Excel Monte Carlo Retirement Calculator that allows you to do just that! If you wish to plan for your retirement, recognise its importance: The cost of postponing your…
Continue reading →Regular readers of freefincal would recognize that the blog now has a decent set of resources for mutual fund evaluation and analysis. I would like to encourage the use of these tools and calculators by publishing analysis of a few mutual funds from time to time. The aim is to make it clear that mutual…
Continue reading →Create your own personal financial plan with this excel-based financial planning template. Ever since I made my first retirement calculator, I have had several requests to make an integrated financial plan creation tool. The only reason I took this long to make it is sheer boredom. I thought, since I had already made most of…
Continue reading →Nandish Desai and Manish Chauhan run Jagoadvisor – a portal for financial advisors. Recently, they posed the following retirement planning challenge, Scenario: ‘You meet a 55 year old with a corpus of Rs. 70 lakhs. The person seeks financial independence in retirement and expects an annual inflation of about 8-9%. He would like to invest the corpus in…
Continue reading →Financial goals maybe arranged into three categories. (a) Goals based on a one-time expense. Classic example is a marriage. You invest to create a corpus, which evaporates around the time of the wedding. Any event that is unlikely to occur again or occurs infrequently would fall in this category. For example, a child’s under-graduate and…
Continue reading →How different is a large cap equity mutual fund from an exchange-traded fund (ETF) that tracks an equity index? The portfolio of an index ETF is likely to be nearly identical to that of the index at any point of time. Typically the portfolio of all large cap mutual funds will have a good amount of…
Continue reading →On occasions like Dhanteras and Akshaya Tritiya, AMCs and fund distributors advice you to start gold ETFs for financials goals like a child’s marriage. For some reason, many around us seem to think that one must start investing in gold-ETFs because gold is needed for our children’s (typically daughters!) marriage. As a result, many end…
Continue reading →Use this automated mutual fund rolling returns calculator to evaluate the consistency in performance of a mutual fund over any interval from April 3rd 2006 onward. You can compare results with benchmarks like Sensex, CNX Nifty, CNX Small-cap, and CNX Mid-Cap. This version is a major improvement over the previous Excel Rolling Returns Calculator. The analysis…
Continue reading →Annualized yield is a notion associated most often with fixed deposits. Many of us do not realize that it could be used with recurring deposits as well. It can be, and is used by many banks. FD yield though misleading, is at least correctly calculated. I am very uncomfortable with the way RD yield is…
Continue reading →The difference between annual yield and annual interest and how it can be used to misrepresent gains from fixed deposits is discussed. Let us face it, most investors are confused with the two percentages associated with a fixed deposit: annual interest and annual yield. Most people make the common mistake of assuming that the yield…
Continue reading →Excel’s IRR and XIRR and simple but excellent tools to estimate the returns from a periodic investment in a volatile instruments (eg. Mutual fund SIP). Unfortunately, two issues affect its usage: Bug(s) of unknown origin that make it give the wrong result sometimes. Read more about this here: XIRR: A Bug? (Thanks to financial planner…
Continue reading →A retirement plan is a road map that helps you understand, plan and prepare for a financially independent life post-retirement. Well, that is what it is supposed to be! Unfortunately, each person’s retirement roadmap is unique. While past and peer experience can aid to a certain extent, it is entirely up to us to chart…
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