Every investment carries risk so don’t make assumptions or be complacent with your investments. Make informed choices and most importantly, just start.
By Satyen Kothari
Leaving money in a bank account idling away is an unforgivable waste of your money’s potential. In fact, the only growth you will experience is the increase in your sense of regret for not educating yourself and taking action. Life is too short, don’t have regret. Especially regrets that leave you with less money in your pocket.
There are so many great products available and a lot of literature. This in itself may present a problem - information overload. Here are 5 ways to earn steadily by investing and their implications. Remember - every investment carries risk so don’t make assumptions or be complacent with your investments. Make informed choices and most importantly, just start.
Liquidity: Same day or next day
Flexible with no lock-in, no entry or exit loads, fast access to your money, low risk investments.
Gains taxed at normal rates - the same you pay on your bank. Available online and quick to execute investment. Add money in or take it out as you wish.
Fixed DepositExpected Returns: 3 to 7%
Liquidity: Same day BUT check for penalties
Fixed deposits are very conservative and low growth options. Some banks are starting to offer better interest rates and no penalty to your money if you do need to break the term earlier. Not my favourite by a long shot but mentioned only for those with absolutely no risk tolerance and with a desire to do a lot of constant planning of when they will need their money, when they have extra money to be fixed in a deposit, and being disciplined to make a deposit on time and break it so checks don’t bounce.
EquityExpected Returns: Open-ended range
Liquidity: Next day
One of the best ways to turbocharge savings to build wealth. Get a good advisor. This is the most critical bit. Invest regularly via a monthly SIP option to balance out market fluctuations, to encourage further growth and savings as well as remove a lot of stress in needing to analyse the state of the market each month.
Equity has higher potential and with that comes higher risk. Tax rates from gains are some of the lowest across all asset classes.
PPFExpected Returns: 7%
Liquidity: Fixed for a long minimum term
Traditionally popular and currently at the lowest rate of return since the 80’s. The benefit: interest earned holding a sovereign guarantee and the tax-free returns holds appeal for some. Rules around number of deposits per year as well as maximum and minimum deposits won’t work for anyone wanting flexibility. Still better than doing nothing.
P2P LendingExpected Returns: 18-26% returns
Liquidity: Based on the term of the loan you offer
The initial investment can be low. Diversify your risk across many different loans and risk levels rather than making a single loan. Earn back part of your investment, both principal and return every month. Feel good knowing that you can help someone change their life.
Just remember that selection of who you loan to is crucial as there is no insurance available. Vet your borrowers and the platform carefully. Consult your CA for how these are taxed - usually taxed like ordinary passive income (example - bank interest).(The writer is the Founder and CEO of Cube Wealth and Founder of Citrus Pay)