Start by deciding either to invest in high-risk high-return instruments like shares or mutual funds or by mellowing the risk with assured return investments such as FDs and PPF.
Unlike mutual funds or equity investments that require you to directly invest in the market, fixed deposits park your investment in safety for your chosen tenor.
All along this period, your principal earns compounded interest. So, in order to earn from your investments, you should aim to create income from your savings a practice alongside seeking safety for your funds.
Here is how you can save and earn money at the same time to achieve your financial objectives.
Create a balanced investment portfolio
It is vital to have a well-planned investment portfolio. A diverse and balanced portfolio will be a support system for you, taking care of both your short-term and long-term needs. First, understand your risk appetite based on your present income and expenditure.
Experts suggest that when you are reaching or have crossed your retirement age, 70% of your portfolio should consist of low-risk investment options. This equation reverses when you are in your youth and are decades away from retirement. However, selecting the right asset classes and instruments for investment is the key for growing your money.
So, choose a good mix of options ranging from mutual funds, FDs, PPF, government bonds, and scrips based on your age, financial standing, and risk appetite.
Ensure that FDs are a part of your portfolio
Cumulative FDs offer a lock-in period of up to 5 years. This means that once you decide the compounding frequency and park your funds in a cumulative fixed deposit, you can only withdraw the funds once it attains maturity. So, this may be a good option to make your money earn high interest over time, but it will not generate periodic income for you. On the other hand, if you invest in non-cumulative FDs, you will get a chance to get an interest payout at your chosen frequency all through the tenor.
To maximise your returns from an FD and ensure safety, you can choose to invest in one such as the Bajaj Finance Fixed Deposit which has ICRA’s MAAA (stable) rating and CRISIL’s FAAA/Stable rating. With this FD your money parked in safety, earning higher FD interest rates of up to 8.40%. You can also check your maturity amount using the FD calculator before investing to calculate your exact returns. This can help you plan finances your goals in the future with ease.
Don’t be risk-averse and invest in shares when you’re young
The equity market is volatile but offers high returns. The trick here is to invest in shares that are sure-shot winners in the market. You can undertake equity investment on your own or take help from experts to invest a portion of your funds regularly in the market. Spotting a bullish trend in the market will help you maximise your investment.
However, do your research and take guidance before you start investing a larger share of your income into shares. To start, take a disciplined approach and invest only your extra funds in equity. Increase your funding capacity gradually when you are more and more confident. Also remember that capital gains from equity above Rs.1 lakh during one financial year are taxable. So, plan ahead when it comes to tax.
Start SIPs to earn more and bring discipline
You can invest in SIPs by setting aside a fixed sum every month for a minimum lock-in period of 1 year. Fund managers then pool your investment along with those of others in the market. They use your money to invest in stocks, bonds, and other market instruments. However, unlike shares, mutual fund schemes balance the capital appreciation with the market fluctuation.
This means that the money is put into the market in intervals and not all at once. So, the net impact gets equalised, yielding higher returns for you. Investments in SIPs is more flexible and you can start an investment plan at just Rs. 1,000 a month. Also, you can withdraw funds from your SIP investment after one year at no extra charge in case you face an immediate need for finances.
Now that you know the importance of investing your money the right way, create a balanced portfolio to grow your money. This will ensure that you have a steady corpus of funds to help you cope with your future needs.