It almost pulled the rug from under the feet of many Indians on the evening on 8th November 2016, when PM Modi announced the demonetisation of Rs 500 & Rs 1,000 notes. All the cash that was stashed in our homes, our wallets would be worthless within the next 4 hours. Then a ray of hope shined through the dark clouds when the government announced that people don't have to worry and they could withdraw new currency or exchange and deposit their old notes, but with limits on withdrawals. Since then, there are long queues outside the banks and ATMs, people start waiting hours before the banks open, people are collapsing in the queues, some are making friends for life in the queues, some are gratifying their philanthropic spirit by serving tea or water to the subjects of misery standing in the queues, etc. And at the end, they receive a skimpy amount which might not even provide for essentials that can last for a week.

In such a situation what do we do?? Queue up with others Or Play Smart?? Do we really need cash to survive?? The answer is No. Technology will help us survive without cash. The Demonetization move is aimed to eradicate black money and corruption from our country, by transforming us into a cashless economy, and technology is the only means through which this move can be implemented.

In the present day scenario, we are not left with a choice, but to adopt technology. There are various digital tools at your disposal which will effectively handle your cash requirements. Following are a few popular techniques which will help you 'Go Cashless':

• Electronic Wallets: You don't have to go to a mobile shop to get your phone recharged, you don't have to stand in long queues to pay your electricity bill, water bill, mobile bill, etc. Thanks to the digital wallets. You just have to transfer money from your bank account to your wallet and you are good to go. Book movies, flights, hotels; pay bills; purchase groceries, clothes, medicines, toys; pay to the autowalas, retail stores, coffee shops, etc., with your digital wallets. You get the convenience of doing everyday transactions through these wallets, plus you get discounts, plus you get a Cashback on your purchase, which is a cherry on the cake. Paytm, Mobikwik, Freecharge are the popular Digital Wallets.
• Unified Payments Interface (UPI): UPI App is a GOI initiative, through which you can pay or receive money from and to any bank account through a mobile App. You can transact anytime and from anywhere, simple and quick. You don't have to enter ifsc code, transaction passwords and wait for the payment to complete. You just need to enter a PIN to execute the transaction.
• RTGS, NEFT: In UPI, there is a transaction limit of Rs 1 Lakh. In case, the transaction is of a higher amount, then you have the option of RTGS or NEFT.
• Bank Apps: Many banks have their apps to enable their customers go cashless. Like Digital Wallets, you can add money from your bank account and start paying your bills, movie tickets, buy investments, etc. through your mobile.
• *99#: You just have to dial *99# from your mobile phone, and you can transfer funds, check account balance, etc. without internet connectivity. This facility is available in 11 regional languages. This is called USSD based mobile banking and you can transfer an amount as low as Rs 1 to the max Rs 5,000 in a single transaction. The service is available 365*24*7.
• Plastic Money: You can always use your debit and credit cards for payments, be it online payments or through a swipe machine. Most departmental stores and even small retailers have a card machine. You don't have to carry heaps of cash with you, your wallet becomes lighter, and the risk of theft is also minimised.

Though Demonetization has caused a short term turmoil, but you can escape the clutter through the above tools. In the long term, it is for the benefit of all. Using Digital methods will not only help us in battling against the cash crunch but will also help in boosting economic growth. When we start paying electronically, it will help in avoiding tax evasion as the sellers have to pay tax on all online transactions. This will result in more tax to the government and more development. Less Paper also means more trees, and a healthy environment.

Go Digital, Go Cashless!

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Compared to equity market, bond market is considered to be stable and less volatile. But events such as falling currency makes the market volatile, depreciation and appreciation of currency against dollar is the most happening event and most of the time regulator RBI take measure to balance it time to time. And such measures often affects the bond price movement adversely.

Certainly the volatility in debt market creates doubts in minds of investors about debt market and its functionality. The base of debt market is interest rate movement. Interest rate scenario affects bond prices and so debt funds return. There is an inverse relationship between interest rate and bond prices. As interest rate moves up, bond prices come down and vice versa. This is one of the reasons why bond funds delivered negative return recently with unexpected spike in short term rates due to RBI action. So investment in long duration bond funds is recommended when interest rates are likely to fall.

There are few important things to consider before investing in debt funds :

• Investment duration of investors
• Average maturity period of bond/debt fund
• Interest rate scenario
• Understanding of the product

If you want to invest for one year, you will go to bank and invest in 1 year bank F.D. In the same way if your investment horizon is 1 year, you should opt for debt fund suitable for 1 year investment horizon. Investing in long duration bond/gilt fund for 1 year can prove risky for retail investors. So matching investment horizon with category of bond fund is very essential for bond fund investor.

Short Term Money Market Funds:
These types of funds invest in very short maturity bond papers, typically less than 91 days maturity. So interest rate risk practically does not exist for this category of funds. These are ideally suited for investors who are looking for investment of less than 1 year with low level of volatility.

Long Term Bond Funds:

Duration Funds:
Duration based funds are the ones, which take long term call on interest rate movement. Fund manager of duration fund is active in bond trading and he/she takes call on bond portfolio based on interest rate movement. i.e. if interest rate scenario looks falling, fund manager increases the duration of the portfolio by buying long maturity bond paper and vice versa. Normally they hold long duration papers of above 5 year maturity.

Accrual Based Funds:
In Accrual based funds, fund manager does not play or rely on interest rate movement. Here they try to identify high yielding/high interest paying and high credit quality bond paper, and hold them till maturity. They play on accrual and not on interest rate movement. High yields earned on portfolio get reflected in fund performance. Normally the tenure of the bond paper remains on the shorter side, less than 3 years. So this category of bond fund is less vulnerable to interest rate risk.

Both duration funds and accrual funds are for little longer horizon of above 2 years and volatility remains on a little higher side in duration funds compared to accrual based funds.

As explained in the above matrix, as an investor one needs to match his/her investment horizon with a suitable product within debt fund category.

Conclusion:
As discussed, mutual funds have different products within debt fund category catering to investor requirements across time frame. Ranging from one day to 2 years, investors can look at debt funds, which suit their investment requirements to generate tax efficient return compared to other fixed income products.

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Parminder Singh and Bhupinder Singh are best friends. They have been brought up in the same neighbourhood, studied in the same class in the same school, and then they were benchmates in college. It was time for Parminder to leave for Pune as he took up a job there. So one day, before exchanging goodbyes, they were having a serious discussion about their future. They realized that with the ever increasing cost of living, it would be very difficult for them to realize their life goals, how will they sustain themselves after retiring kept hovering in their minds. They had their houses, which both of them inherited from their Parents. At that moment, they were 25 years old, unmarried. They both thought of investing for their retirement, which will happen 40 years later, when they will be 65 years old. Parminder moved to Pune and forgot about the discussion, but Bhupinder followed and made an investment of Rs 250,000 in an Equity Mutual Fund and he also started an SIP of Rs 1,000 a month in another equity mutual fund. Now, five years later Parminder came to Jalandhar and they met. The clock ticked and the topic of investments rolled in. Parminder had nothing to contribute, but Bhupinder did, since he did invest and the value of his lump sum investment of Rs 2.5 lacs has grown to Rs. 4.5 Lacs in addition to the SIP he is running.

Parminder was disheartened, since he has not saved even a penny for his retirement. But Bhupinder, being his true friend, encouraged him and said, "Pammi, it is never too late. You are still young, and can still invest for your retirement which is 35 years hence". Parminder agreed and he too invested Rs 4.5 Lacs (which is equal to the present value of Bhupinder's investment) in the same mutual fund for his retirement and he also started an SIP of Rs 1,000 a month. Now, let's see what would be the value of their investment 35 years later.

Parminder Lumpsum investment: Rs. 4.5 Lacs
Value at the age of 65: Rs. 2.78 Crores
SIP Investment: Rs. 4.2 Lacs (Rs 1,000*12*35)
Value at the age of 65: Rs. 55.10 Lacs
Total Investment: Rs. 8.7 Lacs
Total Retirement Fund Value: Rs. 3.33 Crores

Bhupinder Lumpsum investment: Rs. 2.5 Lacs
Value at the age of 65: Rs. 2.78 Crores
SIP Investment: Rs. 4.8 Lacs (Rs 1,000*12*40)
Value at the age of 65: Rs. 97.93 Lacs
Total Investment: Rs. 7.3 Lacs
Total Retirement Fund Value: Rs. 3.76 Crores

Analysis:
Parminder invested Rs 1.4 Lacs more than Bhupinder, yet his returns were Rs. 43 Lacs than Bhupinder.
Why?

Because he started 5 years late.
Inference from the story

Start Early: The sooner you start the better. The only reason why Bhupinder was the winner in the investment race was he started five years earlier. Firstly, he enjoyed the benefit of investing Rs 2 Lac less than his friend while eventually landing at the same value in case of lump sum investment. And in case of SIP, though he invested a little more, but at maturity he outperformed his counterpart by a staggering Rs 43 Lacs. The reason behind his win is the most powerful force in the universe "The Power of Compounding". The extra five years were a blessing for him.

It is never too late: The anecdote is not meant to discourage the ones who did not invest when they were 25. Though the best time was the one which has passed, yet there an ever brighter tomorrow. If Bhupinder wouldn't have invested even at 30, he wouldn't have had Rs 3.33 crores for his retirement life. All you have to do is for the love of yourself hit the start button.

So, whatever age you are. Go ahead, reach your advisor and start investing!

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