Rupee Cost Averaging

Rupee cost averaging is an approach in which you invest a fixed amount of money at regular intervals. This in turn ensures that you buy more shares of an investment when prices are low and less when they are high. By investing on a fixed schedule, you avoid the complex or even impossible duty of trying to figure out the exact best time to invest. The rupee cost averaging effect - averages out the costs of your units and hence lessens the results of short-term market fluctuation on your investments.

Getting started on a rupee cost averaging strategy

• Decide on the amount you can invest on a regular and long-term basis
• Select an investment you want to hold for the long-term
• Invest at regular intervals (weekly, monthly or quarterly)

 

Aadhaar linkage with bank accounts mandatory, - RBI

Mumbai: Reserve Bank of India on Saturday said biometric identity number Aadhaar linkage with bank accounts is mandatory.

The RBI clarification followed media reports quoting a reply to a Right to Information (RTI) application that suggested the apex bank has not issued any order for mandatory Aadhaar linkage with bank accounts.

"The Reserve Bank clarifies that, in applicable cases, linkage of Aadhaar number to bank account is mandatory under the Prevention of Money-laundering (Maintenance of Records) Second Amendment Rules, 2017 published in the Official Gazette on June 1, 2017," the central bank said in a statement.

These rules have statutory force and, as such, banks have to implement them without awaiting further instructions, it said.

The government in June had made Aadhaar mandatory for opening bank accounts as well as for any financial transaction of Rs 50,000 and above.

Existing bank account holders have been asked to furnish the Aadhaar number issued by the Unique Identification Authority of India (UIDAI) by December 31, 2017, failing which the account will cease to be operational, the government notification had said.

There were reports in media quoting an RTI query in which RBI had said it "has not issued any instruction so far regarding mandatory linking of Aadhaar number with bank accounts".

The government in Budget 2017 had already mandated seeding of Aadhaar number with Permanent Account Number to avoid individuals using multiple PANs to evade taxes.

The notification issued amending the Prevention of Money- laundering (Maintenance of Records) Rules, 2005, mandated quoting of Aadhaar along with PAN or Form 60 by individuals, companies and partnership firms for all financial transactions of Rs 50,000 or above.

Source

How Often To Review Your Mutual Fund

One should avoid the temptation to review the fund's performance each time the market falls or jumps up significantly. For an actively-managed equity scheme, one must have patience and allow reasonable time - between 18 and 24 months - for the fund to generate returns in the portfolio.

The review may become more pronounced in case of thematic or sectoral schemes as they are more prone to the changing economic environment.

It is advisable for common investors to make a separate watch list of funds that are found to be underperforming their benchmark or their comparable peers. From this list, one should look for improvement in performance over the subsequent 2-3 quarters. A consistent under-performance over 3-4 quarters may warrant shifting the investment to other better options. One needs to even check the reason for the under-performance, which may be expressed in the fund manager's commentary. The underlying stocks in the portfolio of an MF scheme keep changing and along with it change the associated risks. An important factor is the risk metrics. If the risk profile of the fund has skewed further towards "High" risk while the returns remain the same or do down, it may be advisable to exit the fund.

Therefore, a review of the fund's risk-adjusted return, i.e., a measure to find how much return an investment will generate given the level of risk associated with it, could be more helpful.

Different Types of Mutual Fund in India (Part-1)
Different Types of Mutual Fund in India (Part-2)
Different Types of Mutual Fund in India (Part-3)

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How many years need to get your money Double (RULE-72)

The 'Rule of 72' is a simplified way to determine how long an investment will take to double, given a fixed annual rate of interest. By dividing 72 by the annual rate of return, investors can get a rough estimate of how many years it will take for the initial investment to duplicate itself.

For example, the rule of 72 states that ,,₹1 invested at 10% would take 7.2 years ((72/10) = 7.2) to turn into ₹2. In reality, a 10% investment will take 7.3 years to double ((1.10^7.3 = 2).

When dealing with low rates of return, the Rule of 72 is fairly accurate. The above chart compares the numbers given by the rule of 72 and the actual number of years it takes an investment to double.

Notice that, although it gives a quick rough estimate, the rule of 72 gets less precise as rates of return become higher. Therefore, when dealing with higher rates, it's best to calculate the precise number of years algebraically by means of the future value formula.

 

Happy Diwali

May the Divine Light of Diwali Spread into your Life Peace, Prosperity, Happiness and Good Health.
With a hope that you attain success and bliss
with every light that is lit
on the day of Diwali!

HAPPY DIWALI
Pradipta Kumar Dash