Income – Expenditure = Saving
But the new formula says:
Incoming – Saving = Expenditure.
So, it’s a very healthy habit to save first and then spend. This will keep you disciplined and ensure that you don’t end up spending so much that you don’t have any amount left to save or invest.
Fixed Deposits (FDs)
Fixed Deposits aka FDs are one of the most common ways of investing. One reason being that they are safe. But while they give guaranteed and predetermined returns, they often don’t end up beating inflation. Now, we know you are asking what the hell is inflation. Well, it’s basically goods and services getting costlier with time. So if the inflation is 7% per year but FDs give you 6% returns, it ends up eroding your money. So it’s suggested to consult your financial advisor to know how much amount you should invest in FDs depending on your age and financial goals.
Public Provident Fund (PPF)
Public Provident Fund is a government investment scheme in which you can invest Rs 500 to Rs 1,50,000 every year. One also gets tax exemption of Rs.1.5 lakh under Section 80C. Tax exemption means you don’t have to pay tax on that amount. While this investment option has a lock-in period of 15 years, you can withdraw up to 50 percent of the amount after seven years, starting from the end of the year you made your first contribution.
Mutual Funds
A mutual fund is a company that takes money from many investors and invests the money in securities such as stocks, bonds, and short-term debt. They are riskier compared to FDs and PPFs. While there are many types of mutual funds, if you are a newbie, you can go for Balanced Advantage Mutual Funds. It’s best to have a time horizon of at least 3 years if you are planning to invest in mutual funds. This will take care of the ups and downs and ensure that your returns are better.
Initial Public Offer (IPO)
IPOs are the best if you want to enter the stock market as it’s relatively less riskier and will help you in getting the hang of things. It is a process in which a private company or corporation sells a portion of its stake to the investors and thus becomes public. But one must be careful before investing in any IPO. One should look at subscription numbers (how many shares are offered and how many applications are received) and the Grey Market Premium (GMP) which gives an indication of how much profit or loss can you make in that particular IPO. You will need a demat and trading account to apply IPOs.
Disclaimer: Article only for educational purpose. Please consult your financial advisor.
