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Understand Most Important Concept of Debt Funds

  1. Understanding the most difficult formula of Debt Funds

Most are confused by the Debt Funds formula that “When interest rates rise debt funds NAV drops and when interest rates fall debt funds NAV rise”.

How this happens perplexes most.

As they say Ghee jab seedhi ungli se nahi nikalti toh use tedhi ungli se nikalni padti hai.

So let’s understand this debt fund NAV relationship through an analogy.

Let’s say two friends Ram & Shyam take up similar jobs. The only difference is Ram’s job has him to sign up a bond or agreement of serving for at least 2 years while Shyam’s has it for a mere 5 months.

Both like their jobs and they work diligently.

However,  2 months later an amazing opportunity arises by way of another “job offer” paying double the salary they are currently drawing.

Now what do you think will happen to sentiments of Ram and Shyam.

Remember Ram has a 2 years contract / bond and only 2 months have elapsed.

Shyam on the other hand has a 5 months bond / contract  which is just 3 months away.

If there was an NAV that represented Positive & Negative sentiments what do you think would happen to the NAV of Ram and NAV of Shyam.

Ram would be extremely upset as he is bonded to his job for another 22 months and has no option but to let go the greatest offer of his life. His NAV representing his sentiments would drop significantly.

Shyam on the other hand has just 3 months for his bond/contract/agreement to expire and he believes he will be able to to grab the greatest offer of his life. He would be a little anxious because of the 3 months that he would have to manage but because 3 months isn’t that long a period his Happiness NAV would not be adversely affected.

This is exactly what happens in debt funds having either long duration or short duration investment papers when interest rates rise.

Rising interest rate is an opportunity to migrate to a higher yielding paper.

The long duration fund does not have an escape route and hence its NAV falls while the short duration fund has an exit route round the corner. Hence it’s NAV is less impacted.

Therefore when one is expecting interest rates to go up, one must move from long duration Corporate Bond Funds and Banking and PSU Bond Funds to Low Duration Funds.

Hope this explanation once for all puts at rest every confusion that arises out of the blindly followed formula “If Interest Rates go up NAV comes down and If Interest Rates come down NAV goes up”

Dharam Lessons Questions

Key Questions 1

Questions that advisors should ask clients to unearth deeper insights and prepare a better plan for them.

1)  How do you make investment decisions?

The idea of this question is to figure out whether the client understands investing in the first place or is he like most a victim of greed and fear.

2) Can you recall your earliest memory of money and of investing?

Our first memories of money usually becomes the foundation of his thinking and beliefs. For example if one has seen scarcity in  childhood, he or she is likely to be extremely risk averse. Such information becomes extremely critical in managing the client. Remember every client like every patient is different. Knowing the difference is as important as knowing the similarities.

3) Do you like to hike or tour alone or go with a group?

This gives an idea about his mentality; whether he will have a tendency to follow the herd or go independent. Again this information helps the Advisor plan his course of action with the client; how much to work on behavior management.

More Questions to follow ………

Dharam Lessons Selling Skills Stories Story Selling Timeless

Why is Marketing Misunderstood

Marketing is nothing but product communication through a “fun” or “entertaining” lens

Now the challenge is that hardworking students of marketing feel a kind of loyalty towards numbers and math and somewhere deep down believe that “fun” isn’t meant for good people.

What most people don’t realise is that communication only works when you focus on the likes and interest of the listener.

And it just takes little to realise that most people are easily drawn towards “fun” and “entertainment”.

Therefore a good marketer should dress up the brand appear as a “entertainer” or “performer”. This is popularly known as brand building.

Some categories by virtue of their form are more “fun” than others.

For example

1) Sports

2) Music

3) Bollywood and movies

4) Travel

It is easy to market the above categories because “fun” is an integral part of their soul.

The birth of advertising lies in this philosophy and smart brands have used advertising to good effect.

Categories like cars, clothes, soft drinks, cigarettes, alcohol, cosmetics have made their advertisement entertaining and thereby added the element of “fun” into their personalities.

This is the only formula for marketing. And hard working students need to understand that one has to work harder to manufacture “fun”.

Albert Einstein famously said, “Not everything that counts can be counted, and not everything that can be counted counts”.

Hence love your math and numbers only to that extent and embrace creativity thereafter.

Categories like mutual funds have a long way to go on this path and as an individual I have been trying my best through my contributions.

If your clients like the images which have “fun” as their key ingredient do not be surprised.

People love those things and importantly those people that make them smile.

“Fun” and “Fear” are the only two ways to ensure engagement and learning.

And clearly between the two ‘fun’ is healthier.

Educating clients is our vision but doing it in an entertaining manner should be our mission.

So as marketers, we are artists & entertainers but we also educate as a consequence

I rest my case.


Dharam Lessons Stories Story Selling

Idiot Box

Akbar once put a question to his court that left everyone puzzled.

As they all tried to figure out the answer, Birbal walked and asked what the matter was. And so they told him the question.

‘How many crows are there in the city?’

Birbal immediately smiled, went up to Akbar and announced that the answer to his questions was twenty-one thousand five hundred and twenty-three.

When asked how he knew the answer, Birbal replied, ‘Ask your men to count the number of crows.

If there are more, then the crows’ relatives from outside the city are visiting them.

If there are fewer, then the crows are visiting their relatives outside the city.’

Pleased with the answer, Akbar presented Birbal with a ruby and pearl chain.

This is the kind of stories being dished out of business news channels day in a day out.

For example: take the question “Market kya bolta hai (What’s the market saying)” or

Where will the index be by in 5 years?

And haven’t you heard very intelligent and learned people saying that the index could triple in 5 years.

The use of the word ‘COULD’ is like Birbal’s answer.

Again we hear things like the market will rise provided “MONSOONS” are good, provided “FISCAL” situation improves but there are risks also like outcome of various “ELECTIONS”

Thus the media and experts are always ready with BIRBAL answers and like Birbal’s earned Ruby and Pearls the media earns huge advertising revenue by aggregating fools who sit in front the idiot box.

Dharmendra Satapathy

Dharam Lessons Stories Story Selling Timeless


Sunday Humour…

The little sexy housewife was built so well the TV repairman couldn’t keep his eyes off her.

Every time she came in the room, He’d near about jerk his neck right out of joint looking at her.

When he’d finished she paid him & said, “I’m going to make a… well….. unusual request. but you have to first promise me you’ll keep it a Secret.”

The repairman quickly agreed and she went on.

“Well, it’s kind of Embarrassing to talk about, but while my husband is a kind, decent man….

Sigh — He has a certain physical weakness. A certain disability.

Now, I’m a woman and you’re a man….”

The repairman could hardly speak, “yes, yes!”

“And since I’ve been wanting to ever since You came in the door……”

“Yes, yes!”

“Would you help me move the refrigerator?”

Moral of the Story – 

  1. Don’t look here and there especially at another person’s wealth
  2. Focus on your job
  3. Don’t expect undeserved returns
  4. Never speculate
  5. Stay invested come what may
  6. You investment is your best support during difficult times

Dharmendra Satapathy

Dharam Lessons Stories Story Selling Timeless


Learning from the trees? 

Are thick forests good?

For most people a thick forest with several trees stacked besides each other would seem like a very good thing. After all we have always understood that a thick forest cover is divine.

However, that is far from the truth. The thicker the forest the bigger is the risk of forest fire.

Not only is the probability of fire more but also the severity of fire is a function of the density of the forest.

In order to keep this under control forest authority’s light up small fires that reduces the density of the forest and this act prevents a larger fire in the future. So a little pain now prevents a bigger one in the future.

Which means that a small fire is a boon from a longer term perspective.

The stock market too exhibits this kind of character.

In bull markets, the market continues to rise day after day, month after month producing tremendous returns.

While this may appear to be very good but in the long run this too can hurt investors severely because too fast and unnatural growth of the market is not sustainable and results into a bubble that eventually bursts gulping up large quantums of wealth.

Now like the mini fires prevent a bigger fire similarly the market corrections that we see now and then is also a control mechanism that helps to prevent a bigger and more painful crash in the future.

Therefore as in investor one should take the small corrections in their stride and be happy that these corrections provide opportunities for investing more, which in the long-term, results in more wealth creation for investors.

Dharmendra Satapathy

Dharam Lessons Stories Timeless

The Lions

The Trees and The Lions

This Short Story The Trees and The Lions is quite interesting to all the people. Enjoy reading this story.

Far away from a kingdom there was a huge jungle. In that jungle, there were thousands of trees. Among them two were very good friends. They stood side by side. The same jungle was the home of many lions. Those lions used to kill other animals living in that jungle and eat them. The carcasses of the dead animals used to stink and a foul smell would hang in the air. The whole atmosphere was bad to live in.

One day, the two trees, who were friends, were talking. The first tree said, “These lions are polluting our jungle. We have to save our jungle from them. They must be driven out of this jungle.”

“Yes,” agreed the other tree.

A wise old tree, who was listening to the friends said, “They might be polluting the air. But these wild creatures are keeping us safe from woodcutters. No woodcutter will dare to come into the forest which has lions.”

But, this advice did not go into the minds of the trees. The two friends decided to frighten the animals away. That evening, the two trees started shaking violently. “We will frighten the lions away. They will be so terrified that they will leave this jungle and never come back into this jungle,” said the two friends and laughed aloud.

The whole forest echoed with their laughter. “Do not do that,” shouted the wise tree.

But the two friends did not listen. They began moving in the wind and making eerie noises. All the other wild animals in the forest were scared, seeing the two trees and the sounds they were creating. “There is something happening in the forest. Let us run away,” they said. All the animals fled the jungle.

The two friends were happy. “Huh! Now we can enjoy some fresh air,” they said.

But their joy was short-lived. One day a woodcutter came to the forest and started felling the trees. “Now there is no fear of the ferocious lions,” he muttered to himself. Soon there were other wood cutters. Seeing this, the wise tree said, “Now all of us will be doomed.” The two friends cried out, “How foolish we have been. We should have listened to this wise tree.”

A little later the two tree friends were brought down by the wood cutter’s axe.The Trees and The Lions are must.

Day by day, more and more trees were destroyed by many woodcutters

Likewise investors are so worried about “market volatility”.

They wish to invest in an environment which displays stability and zero uncertainty.

However it is volatility which creates opportunities for investors to make better returns and more wealth.

Volatility gives new investors a chance to catch up with those who have started investing before them.

Taking volatility away will reduce the opportunity for new Investors.

Taking volatility away will reduce the opportunities for people who wish to invest systematically over a time period.

Market volatility is like the Lions.

It helps the investor make better return over the long term and consequently more wealth.

Dharmendra Satapathy

Dharam Lessons Financial Plannig Feed Meme Mutual fund news feed News Stories Timeless

Happy Easter

Dharmendra Satapathy and the NextLevel-Education Team

wishes its friends every prosperity and contentment on occasion of Easter. Let us learn how to Invest correctly. Let us gather knowledge that enables us Invest fruitfully in our great nation’s Economy. Let us find financial knowledge, for only knowledge ensures growth and happiness. 

Dharam Lessons Stories Timeless

The Security Guard

The Security Guard for your Finances

Having a security guard does not mean that your home should be burgled every night and he should be fighting off the burglars every night. Having a guard provides you with peace of mind.

You are happy to have him guard your home despite theft. Even if several years pass and there isn’t any attempt of theft, one never regrets having the security guard outside.

Likewise, having a Financial Advisor does not mean you need to engage him all the time to transact on your behalf.

Like the security guard, the Financial Advisor guards you and your interests.

He guards you against incorrect investor behaviour, stops you from untimely redemption and ensures you stay invested for the long term.

Just being there on your behalf guarding your wealth is a job that has to done!

Dharmendra Satapathy

Advisor Speak Dharam Lessons Stories Story Selling Timeless

Market क्या कहता है?

Actually market says nothing to investors…मारकेट कुछ नहीं कहता है निवेशकों से

In the 1990s it seemed everyone was reaping huge profits by investing in dot com companies.

This got even ordinary people to borrow money against their home equity and they ended up investing over $44 billion in stocks.

Then when the NASDAQ shed half its value, people lost their investments and found themselves deeply in debt.

This kind of reasoning can be found at the root of any “market kya kehta hai” philosophy.

Instead of acting rationally, people get excited and let emotions guide their choices by listening to “market kya kehta hai”.

To close the gap, think beyond “market kya kehta hai” and remember surprising past events: the dot-com crash, the housing bubble, the 2008 debt crisis; how the innocent ignorant got punished on account of greed.

All these incidents highlight the importance of investing carefully, without getting caught up in “market kya kehta hai”.

  1. Market says nothing. Ignore the noise.
  2. Behaviour says everything. Manage your behaviour.
  3. You need an advisor to help you manage your behaviour because managing your own behaviour is easier said than done.
  4. Systematic investing, asset allocation, diversification are all optimisation strategies; these strategies make your investment journey less volatile and encourage you to remain invested.
  5. Investment should only and only be goal oriented, founded in conviction and nourished by patience.

Dharmendra Satapathy