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Old 11th February 2008, 18:55   #31
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Quote:
Originally Posted by nkapoor777 View Post
Its pretty simple brother. Now, what I do goes like this:
I invest Rs. 20,000 at the start of every month in a liquid fund or short-term debt fund with no entry/exit load. For simple calculation, let's assume I pay my credit card bill on the 25th of every month. Adjusting for weekends and other holidays, I sell my investment on the 20th of every month. At an average rate of 8% per annum, I would make the following money every month:
Rs. 20,000 * 8% * 20/360 = Rs. 90 every month or Rs. 1,066 every year, if the same strategy is implemented consistently every month in a given year. Even if you take out the Capital Gains Tax, assuming you come under the highest tax bracket (30.36%), you would end up making a cool Rs. 700 every year for this float.
And, needless to say, the more your bill, the merrier you would be, as the return on your float will be correspondingly higher.
Oh! one more thing, I am not taking into account the ultimate benefit of enjoying free credit for anything between 01-52 days.
Try it brother, it will work.
Disclaimer: I am not doubting your knowledge or capabilities with the money market and investments.
In short 700 bucks on 20000 in a year = 3.5%pa.

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Originally Posted by DCEite View Post
True, nothing is risk free. Even 100% debt fund. But the world is not perfect, heck even a bank account is not 100% safe.
care to elaborate on the bank account?

Last edited by babhishek : 11th February 2008 at 18:56. Reason: .
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Old 11th February 2008, 19:02   #32
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Originally Posted by babhishek View Post
In short 700 bucks on 20000 in a year = 3.5%pa.

care to elaborate on the bank account?
I think he meant ANY bank account in a private bank. Erstwhile Global Trust Bank account holders will know what I mean
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Old 11th February 2008, 20:14   #33
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Originally Posted by babhishek View Post
In short 700 bucks on 20000 in a year = 3.5%pa.


care to elaborate on the bank account?
Its not as simple man. You are not stashing away Rs. 2,00,000 for a period of 365 days, are you? It is a monthly inflow and outflow and the returns generated are annualized taking into account the concept of weighted average maturity. I know it seems like too technical, but trust me, it is fairly simple. Knowledge is Power! Its your money after all. Make it work harder for you.

On the bank account part, what DCEite meant in all probability was the fact that there are no guarantees in the financial world, even if it is as simple as a deposit in a savings bank account, be it a private, MNC or a nationalized bank.

Last edited by nkapoor777 : 11th February 2008 at 20:19.
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Old 11th February 2008, 23:21   #34
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Originally Posted by nkapoor777 View Post
I don't know where you saw that. That's the per month yield you saw. Some of these funds have made a killing due to the volatility in the bond market. Annualize that number and you will be startled with the results
Kindly annualize the way your are thinking and compare from same site what was the actual annual yield of the same fund.do youfind any difference?

as far as i know all the returns are PA only. if it is 3.59% per month it amounts to 43.08% PA. then it is better than any investment.
further check the same site now the max yield during the last one month is 2.6% as on 11th feb. it was 3.59% as on 8 th feb. do you think in two days it will change so much ( from 3.59% to2.6%, esp when these two days being holidays?)

i have clearly mentioned the source as valueresearchonline

Quote:
Originally Posted by nkapoor777 View Post
As of today, 17 out of 22 short term debt funds have a 1-year return of 7.84% or higher
bank FD for year as of now yields 8.5%. for the last one year (your reference period ) bank FD's yield was around 9.5%

current SBI rate for 15-45 days FD is 4.75%
46 -90 days it is 5.25%
so in theory a person can make an FD for 46 days for 5.25%.his/her returns willbe more than debit funds.
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Originally Posted by nkapoor777 View Post
I again do not understand your assessment. Over the last few days, we have seen almost all banks in India cut interest rates. Forget the US and Europe, they have cut rates like crazy, especially the US Fed.
Bond rates fluctuate based on CRR, bank rate, repo rate etc but not based on retail consumer lending rates which you are referring. RBI has not chnaged any of these rates CRR< bank rate, repo rate.
read your post again- your equating US fed rate cut with indian bank rate cut for consumer's. equivalent would be RBI Bank rate cut.

Last edited by rkg : 11th February 2008 at 23:31.
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Old 12th February 2008, 16:25   #35
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Originally Posted by rkg View Post
Kindly annualize the way your are thinking and compare from same site what was the actual annual yield of the same fund.do youfind any difference?

as far as i know all the returns are PA only. if it is 3.59% per month it amounts to 43.08% PA. then it is better than any investment.
further check the same site now the max yield during the last one month is 2.6% as on 11th feb. it was 3.59% as on 8 th feb. do you think in two days it will change so much ( from 3.59% to2.6%, esp when these two days being holidays?)

i have clearly mentioned the source as valueresearchonline


bank FD for year as of now yields 8.5%. for the last one year (your reference period ) bank FD's yield was around 9.5%

current SBI rate for 15-45 days FD is 4.75%
46 -90 days it is 5.25%
so in theory a person can make an FD for 46 days for 5.25%.his/her returns willbe more than debit funds.


Bond rates fluctuate based on CRR, bank rate, repo rate etc but not based on retail consumer lending rates which you are referring. RBI has not chnaged any of these rates CRR< bank rate, repo rate.
read your post again- your equating US fed rate cut with indian bank rate cut for consumer's. equivalent would be RBI Bank rate cut.
Well, the rate of return that you saw are indeed one-month returns. You gotta remember markets are not perfect, they are volatile and move unpredictably. A 3%+ return in a month does not mean that it will go on for the rest of the 11 months in the year and you'll have a 36% return annually. Similarly, the equity markets returned a negative 15% over the last month or so. The monthly return has been -15%, and the annualized equivalent is -180% (yes, you read it right). But is it possible? No!!

As I have mentioned in one of my posts earlier in the thread, some bond funds have made a killing in the past month or so due to the volatility. They might have made a killing in the recent times, but they would give up some of their gains and get back to the norm, which is anything between 6-9% annually.

You gotta make an apples-to-apples comparison brother. You would not get a specified return on a one-year Bank FD, if you make a premature withdrawl. If you kept your money locked-in for a full 365-day period, yes, you would make a decent 8-9.5%. But our case in very very different.

We are talking about a float of 20-25 days at max. What is the interest rate Banks give on a FD for this term? You gave the answer yourself - 4.75%. Oh! your theory is a little flawed as well. The returns that the Bank FD is paying you is measured in percentage points per annum, and not monthly. So, in effect, if you invested Rs.1,00,000 in a 45-day Bank FD @ 4.75%, the bank would pay you Rs.585 as interest, which is calculated as follows:

Rs.1,00,000 * 4.75% * 45/365 = Rs.585.62

That equates to a yield of 0.40% per month or an annualized yield of 4.75%. Comparable debt/liquid funds give a yield of anything between 0.50% - 0.75% per month which equates to an annualized yield of 6%-9% per annum.

Other than that, tell me one thing, who in their right mind would pay you interest for 365 days when you only keep your money with them for 20 days a month?

I just made a simple reference because I didn't want to hijack the topic any more and go way beyond what we originally started with. I know the basis for variations in bond prices, but it doesn't seem to be relevant here. We can start another thread on that and discuss the same.

@Mods: A suggestion from my side. Can we shift this discussion to a new thread which starts from DCEite's original post (#57) which got this thing started? We can name it as "How to make efficient use of the credit cards held by you", or something like that. We have already deviated enough from the original purpose of the thread which was to share any issues being faced by the consumers with the credit card companies.

Last edited by nkapoor777 : 12th February 2008 at 16:41.
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Old 12th February 2008, 17:34   #36
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Quote:
Originally Posted by nkapoor777 View Post
@Mods: A suggestion from my side. Can we shift this discussion to a new thread which starts from DCEite's original post (#57) which got this thing started? We can name it as "How to make efficient use of the credit cards held by you", or something like that. We have already deviated enough from the original purpose of the thread which was to share any issues being faced by the consumers with the credit card companies.

Done.

And more suggestions to use credit card wisely are welcome here from all the members.
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Old 13th February 2008, 11:12   #37
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Nowadays almost all banks give you online transaction by transaction statement on your credit card.
Inspite of this, I enter all my transactions at online money management websites. This allows me to track my usage, and since I can tag all transactions, I know how much was spent towards paying bills, shopping, groceries etc.,
I used to pay with cash earlier for many things, but the scenario used to be like this
1. Withdraw money from ATM
2. After 5 days it vanishes and you don't remember how are you spending.
Moving to card means you keep a track of all purchases and you can regulate your spending. I use Online accounting for real people - Moneytrackin'
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