RULE 72

*RULE 72:* Simple, handy and useful.

In personal finance, if you divide the number 72 by the rate of interest, you get to know the number of years it will take for you to double the money..
Eg: if the rate of interest is 9%, simply divide the number 72 by 9% and the answer is 8. Thus it will take 8 years to double your money if you invest at 9% p.a. rate of interest.

*INTEREST:* We can use this rule in reverse to know the rate of interest needed to double your money to achieve your set goal.
Eg: If you have 2.5 lakhs today and you need 5lakh in 5 years. Just divide the number 72 by 5, the answer is 14.41%. Thus you need a type of investment avenue, where you earn at least 14.41% p.a. as rate of interest/returns to double your investment amount in 5 years.

*INFLATION:*
This 'Rule 72' helps you to understand about inflation also. It helps you to calculate the amount of time it will take for inflation to make the real value of money half. Let's say present inflation is 5.5%. When you divide 72 by 5.5% the answer is 13.09 years.  That is to say, if you have 1 lakh in your kitty today, it would take around 13.09 years for the value of the money to be halved..

Hope it helps you in your day to day investments and other finance related activities.📈😊

RULE 72

*RULE 72:* Simple, handy and useful.

In personal finance, if you divide the number 72 by the rate of interest, you get to know the number of years it will take for you to double the money..
Eg: if the rate of interest is 9%, simply divide the number 72 by 9% and the answer is 8. Thus it will take 8 years to double your money if you invest at 9% p.a. rate of interest.

*INTEREST:* We can use this rule in reverse to know the rate of interest needed to double your money to achieve your set goal.
Eg: If you have 2.5 lakhs today and you need 5lakh in 5 years. Just divide the number 72 by 5, the answer is 14.41%. Thus you need a type of investment avenue, where you earn at least 14.41% p.a. as rate of interest/returns to double your investment amount in 5 years.

*INFLATION:*
This 'Rule 72' helps you to understand about inflation also. It helps you to calculate the amount of time it will take for inflation to make the real value of money half. Let's say present inflation is 5.5%. When you divide 72 by 5.5% the answer is 13.09 years.  That is to say, if you have 1 lakh in your kitty today, it would take around 13.09 years for the value of the money to be halved..

Hope it helps you in your day to day investments and other finance related activities.📈😊

A mind game

Vijay Kedia who turned Rs 10 lakh to 650 crore in 20 years of investments at componding rate of 55% pa.He explained the same in this video https://www.youtube.com/watch?v=b53nE7tN0zE

In his talk he said 10 points that have helped him to avoid defeat in the market.

1. Create a fixed income outside the market for your livelihood: Never be dependent on the income from the market.

2. Be informed and read a lot: The market rewards you as per your perception. If you think investing is a gamble, then it is a gamble. If you think it is a business, then it is a business. Read a lot and be a maniac when it comes to reading; it will help you connect the dots.  Warren Buffett once held up stacks of paper and said he read "500 pages like this every day. That's how knowledge builds up, like compound interest."

3.  Invest a part of your savings, not the earnings, into stocks. Also you should only invest a certain amount based on your risk-taking capacity.

4.  Don't leverage: Don't invest from borrowed money.

5. Invest only for five to 10 years; minimum time frame is five years: Rome was not built in a day. It takes time for a story to mature. I always invest in small caps that go on to become mid to large caps.Whenever I bought a small cap, people discouraged me. No one liked the stock. For two years the company went nowhere; after that it gave multibagger returns.

6. Invest only with the best management and let it worry about the company: If you invest with the best management, you don't have to worry. Let management worry because management has its prestige and its name at stake.
Good management in bad business is better than bad management in good business.

7. Your investment belongs to the market and the profits belong to you: As long as you are invested, the profits belong to the market. Don't spend just because the stock has risen because tomorrow stock prices can collapse.

8. Book profits periodically: Invest profits in buying.

9. Don't be happy in an up market, and don't be sad in a down market. He explains how one should avoid regret. He says a stock can go up after you sell it. Don't regret. The stock market is a place of regret. You make money, you regret. You lose money, you regret. You make less money, you regret. That is why it is very important to keep a balanced mind.

10. The stock market is a mind game.

How India Will be Impacted if US Hikes Rate for First Time

If the Fed hikes rates, some foreign investors are expected to book profit in their holdings in Indian shares and bonds; they will likely repatriate funds back to the US, where buying high interest rate bearing bonds will become an attractive bet.
The next two weeks will see a lot of high-volatility trading across financial markets. The ECB (European Central Bank) has come through with an easy money policy, which has, however, disappointed markets, which were hoping for even easier terms. The US Federal Reserve is expected to raise its policy rate for the first time in many years.
This divergent set of actions will impact forex rates. In turn that will alter trading patterns between countries, as the relative value of goods and services change. It might change the assessments of global GDP growth through the next financial year. The markets are already discounting such expectations.
The interest rate parity equation will also change in favour of a stronger dollar if the Fed does hike. The dollar (or any currency) plus interest yield in that currency should equal the euro (or any other currency) plus interest yield for a comparable instrument in the same time period. The interest yield rises on the dollar and it falls on the euro due to central bank actions. So, the dollar should get stronger to compensate.
FED-RATE
In the last two weeks of December and early January as well, we often see reduced trading volumes. People go on holiday and this is financial year-ending for many FIIs. Volume reductions often leads to higher volatility. In this instance, the volumes are likely to be higher but the volatility will also be higher.
The dollar/rupee movements and the impact on Indian stocks will probably be in line with moves in other markets. If the Fed hikes the rate, the rupee will fall. There will also be accelerated selling of Indian stocks (the FIIs are already net sellers of Indian equity in this financial year). If the Fed doesn’t hike, the dollar will harden and there will be some bullish impact on Indian stocks.

The impact of a rate hike in the US on India will be limited because of strong fundamentals
, In 2013, India saw $12 billion in outflows from May to September due to US rate hike worries. A record high current account deficit, double-digit inflation and record-low rupee led to large-scale destruction of shareholders’ wealth back then.
If Fed maintains status quo
If the Fed succumbs to market pressure and decides to not raise rates, global equity markets might rebound. If the Fed does not give a clear deadline or indication of when it wants to raise rates, we could see a bigger rally.

What are Interest Rate Futures ?

Just like any other Future instrument, an interest rate future is a financial derivative product. The way equity future price is based on stock price of that equity, an IRF price is also based on some underlying. In IRF, the underlying is an interest-bearing asset. The interest rate derivatives market is the largest derivatives market in the world. As an individual, when you take any sort of loan (be it housing loan or educational loan or investing your money in some Government or company fixed deposit), you are part of such interest bearing instruments. As a corporate whenever you raise money from the market by issuing bonds you are linked to these interest bearing instruments. Even institutions like Banks, Insurances etc have their portfolio invested in a money market which are impacted by these interest rate changes. Currently, Interest Rate Futures segment offers two instruments i.e. Futures on 10-Year Government of India Security and 91-day Government of India Treasury Bill.

- Bond Prices and how they move:

A Bond when issued for the first time by GOI, has a face value to it, which is basically the amount of money the issuer pays the holder of the Bond when the Bond matures. The face value of both the Bonds which are underlying in case of the IRF’s  (8.83% GOI 2023 and 8.40% GOI 2024)  is Rs.100.

Along with the face value, the other component is the coupon or interest amount that the holder of the Bond gets paid either annually or semi-annually. So, if you have invested Rs 100 at face value in an 8 % GOI Bond, maturing 10 years from now with a semi-annual coupon, you get Rs 4 (Rs 8/2, Rs 8 is 8% of Rs 100 invested) every 6 months for the next 10 years, and get back the Rs.100 on maturity after 10 years.

In summary, Bond prices are inversely related to interest rates in the economy, so:

--- If your view is that interest rates are going up, “Short” Interest rate futures (you profit because when interest rates go up, Bond prices come down).

--- If your view is that interest rates are going down, “Buy” Interest rate futures (you profit because when interest rates go down, Bond prices go up).

- Interest Rate Futures in India

IRF has been launched twice in India, first in the year 2003 and then in 2009. Both versions had few drawbacks like:
- physical settlement of contracts, - short term underlying
- the calculation of closing price on Zero coupon bond.
All of these shortcomings led the product to failure.  In December 2013, SEBI redesigned the product and had advised the exchanges to launch them after meeting the required constraints. IRF was thus again launched in January, 2014.