Dreaming of a big house, traveling the world and owning a fancy car is easy. But these dreams come with a heavy price tag which can be achieved with saving and investing. It is not easy to deal with the conflict between enjoying your present and saving money for the future. As you become older, your priorities change and simultaneously the requirement of the money also changes. Hence, it is extremely important to develop a habit of saving money every month at an early state. Once you have saved enough money it is time to invest the same which will help you in creating wealth. New investors generally are not clear about saving and investing. They fail to understand that these two are different things. Hence it is important to understand the difference between saving and investing.
Saving money basically means keeping a specific chunk of your earned money aside over a period of time. It takes time for an individual to get into a habit of saving money as it requires a lot of discipline and patience. Make an effort to not spend your money on things that are not important. You need to get out of your comfort zone if you want to save more money. You should know your income and then analyse what are the areas you are spending on and try to minimise it. It is important to understand that before you invest your money, you need to save it in the first place. Unless, you don’t have enough money on your hands to save, you will not be able to invest in different forms of investment that will give you a sizeable amount of return.
Here are some of the ways in which you can save your money and invest wisely.
- Diversify your savings: Once you have developed the habit of saving the money, the next step is to select a suitable investment option. You should have a financial goal before you start planning your investment. There is no harm in taking advice from a financial expert.. It is important to analyse your needs before taking any decisions related to investments. There are an array of investment options in which you can invest your hard-earned money. It must be noted that investment plans for long-term have proven to yield better benefits.
- Stocks: Stock markets is one of the most popular forms of investment. Most people, especially early investors, stay away from it owing to its risky and uncertain nature. However, if you do enough research and understand the basics of stock investments, you can earn decent returns. When you invest in shares, you automatically own a part of the company and are also entitled to receive benefits like dividends. Investing in stocks for a long-term is beneficial as the stock grows simultaneously with the company. Also, once you invest for a longer term, you don’t have to give your time to the investment and let the stock take its course. You can visit BankBazaar to learn more on stock investment.
- Mutual Funds: New as well as experienced investors are more comfortable with investing in mutual funds. For those who are unaware, mutual funds are managed by fund managers. They invest in shares as well as other asset classes like bonds, gold, etc. You can invest in mutual funds either via monthly SIP or by investing full amount. There are mutual funds that also offer tax saving which is helpful especially for salaried individuals. However, it must be noted that unlike fixed deposits, the returns from mutual funds are not guaranteed. New investors must position themselves in dynamic asset allocations funds if they are foraying into mutual funds for the first time.
- Public Provident Fund (PPF): As it is a government-backed scheme, PPF is one of the most popular forms of investment in India. It is a fixed income product that has a tax exemption under Section 80C of the Income Tax Act for the interest earned and maturity amount. PPF comes with a lock-in period of 15 years and offers great benefits in the form of compounding tax-free interest. A PPF account can be opened with banks as well as post office. You can also take a loan on the PPF and make an early withdrawal from the 7th year since the inception of the PPF.
- Real Estate: Another popular form of investment is real estate. The real estate sector has seen quite a positive change in prices since over past couple of years. Once you decide to invest in a property, make sure to check the prices of the area you are looking to buy a property in as it will determine the value going forward. Rent and capital appreciation are the two ways in which you can get returns from real estate. The real estate space has benefited from the introduction of the the Real Estate Regulation and Development Act (RERA) has immensely improved the regulations in the real estate space. Investing in real estate is also beneficial when it comes to building a diversified investment portfolio.
- National Pension Scheme: The National Pension Scheme (NPS) will help you plan investments for your post-retirement life. People between the age of 18 years and 60 years can invest in NPS with a minimum amount of Rs.1,000 in a financial year. With NPS, your contribution is invested in a mix of assets. In case of NPS, your money is invested in various assets such as equity, bonds, and government securities.
- Fixed deposits: One of the most common and safest form of investments is fixed deposits. The returns from these deposits are fixed and you are bound to get guaranteed returns. The interest earned on the fixed deposit is added to your income and is taxable depending on your income slab.
It must be noted that you are never too late to start planning your investment. Once you set your financial goals, you have to invest and take smart decisions that will lead to creation of wealth. Have a diversified portfolio of investment. Young investors should not be afraid and venture into taking high risks instead of playing it safe. Finally, you should always be updated about new and upcoming investment opportunities that may garner you maximum benefit.