So you are getting monthly income in your bank account. If you are not earning money right now you will earn money in future. You need to know how to invest that money to secure your financial future. If you let the money stay in your bank account it will depreciate slowly. Inflation is the neglected deadly disease that eats away the returns of the money. Bank generally don’t give high interest rate. Their interest rate is decreasing slowly. In future their interest rate will decrease further. They have their own reasons to do so. As general responsible citizen of our country we have few means to generate huge returns.
1.Invest in different types of bank accounts
There are recurring deposits, fixed deposit, savings account, public Provident fund, post office monthly income scheme (MIS),National pension scheme (NPS),Provident fund, employees Provident fund account. You need to learn how calculate interest and returns generated on your corpus.
Let’s assume your principal amount is P, interest rate is r%, compounding frequency is n. Time is t.
So return is A=p(1+r/n) ^nt
Interest I=[p(1+r/100) ^t]-p
Value of compounding frequency changes every time when
interest is compounded half yearly (n=2)
interest is compounded quarterly (n=4)
Interest is compounded monthly(n=12)
Interest is compounded 365days(n=365)
Put the required value of n accordingly.
Before opening a desired account you need to know all rules of the particular bank. Know that overall returns generated from bank accounts is always lower than inflation rate in long term. We can use bank for depositing regular income,emergency needs and for future plans.
2.Invest in stock market
Stock market is complex when it’s comes to investment.
“Stock market punishes greedy investors, give good returns to disciplined investors”.
This line is so true in stock market. If you have some preconceived notion that you will earn huge amounts from stocks. Then forget those stories. If you don’t you are most likely experience loss. In stock market we, retail investors (people who invest their hard earned money, don’t do intraday trading) make investment with sole intention of beating inflation, generating good returns (~20-40%). Investors invest their money keeping the techniques of fundamental analysis and technical analysis in mind.
Fundamental analysis is for long term investing which is the way for retail investors. Technical analysis is for daily traders. In long term say for 5 to 20years fundamental analysis has the potential to generate huge returns (~20-40%). If you find multibagger stock you can generate huge returns. It’s like finding diamond mines in mines of coal. My personal opinion is to learn fundamental analysis.
Don’t learn technical analysis(it’s not for retail investors, only day traders learn that) Forget greedy mindset. Be discipline while making profits. If you want you can invest in derivatives. Generally speaking people experience huge losses (~90% people) in derivatives. You need to learn fundamental analysis, technical analysis, future & options, financial mathematics. You need to apply all of those things while trading. I don’t recommend to learn that. It’s up to you.
3. Invest in mutual funds
A mutual fund is investment product where 20-100 different types of securities are available all at once. Highly qualified persons manage the mutual funds. So you get their expert management and diversification to all types. Typically assets management company (AMC) handle the mutual funds.
You can exit mutual fund at any time.In that case they will charge a fee called exit ratio. It can be as high as 2%.There are different types of mutual funds.
Mutual funds can be debt fund, glit funds, exchange traded fund, equity fund, income fund, tax saving fund, actively managed fund, passively managed fund, large cap fund, small cap fund, mid cap fund. Mutual funds are less risky than equity. Therefore they generate less returns than equity. But there are exceptions where returns on mutual funds exceeded equities.
There are systematic investment plan(SIP), sytematic withdrawal plan(SWP). Talking about mutual fund you need to adopt disciplined mindset to get long term substantial returns on your investment. Don’t react to every market news. Analyze stock, mutual funds returns monthly, quarterly, half yearly, yearly based on your convenience.
4.Invest in insurance
Insurance is financial backup plan of particular person or item that helps one when one experience loss of the same. Let’s say you want to decide the insurance amount necessary to sustain life in case of mishaps. So calculate your annual income adding all liabilities like house loans, education loans, car loans, EMI, future wedding of sons/daughters, education costs of all children. Now multiply it with 20. You get the perfect amount. Take home insurance, car insurance, health insurance. First read all scheme related documents carefully. Insurance companies sometimes create problems unnecessarily.
5.Invest in Sovereign gold bonds,debuntures
Gold bonds give interests on periodic basis. Invest wisely. Bonds are less riskier. There are gold bonds, corporate bonds, government bonds. Government bonds are less riskier than corporate bonds. You will get the chance of investing in Sovereign gold bonds, bonds, etc. Don’t miss that chance. 5. Invest in real estate Real estate give high returns in long term. When you invest in real estate like lands, flats, buildings, house, it gives high returns i.e., inflation beating returns. There are also real estate bond, real estate trust fund etc. Invest to diversify your investment.
Conclusion
Getting high returns from your investment requires dedication patience persistence and strategic plans. So there’s no need to hurry. Learn first. First target to learn all maths of bank accounts, details of bank accounts. Then go to stock market. Later invest in real estate. You can decide to invest in cryptocurrency but it should come later after learning top five points. Avoid any broker in offline market who claims to give high guranteed returns. Learn everything then invest in online. Thanks for reading.
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