1st Time Investor? Here's 3 Ways to Start Investing
Beginners Guide to Making Money Work for You
We as individuals can work an
only a certain number of hours each day and only for a limited number of years
in our entire life.
But money is a tool that has
been designed in such a way that it can even work when we are not working. It
works when we are sleeping, it works when we are on vacation, whether we are
working or not, money keeps on working round the clock.
So, if we want to attain true Financial Freedom, we need to learn the
Science of Making Money Work for Us even
when we are not working for whatever reasons.
Simply put, making money work
for you means your money is earning
interest or profit for you.
Here are 3 tools that you can
use to start your journey towards creating a life where you don’t have to work for money.
1. RECURRING DEPOSIT
2. FIXED DEPOSIT
3. MUTUAL FUND
It’s a
particular kind of Term Deposit
offered by banks in India. In recurring deposit, you can deposit a fixed
amount of money every month on a predefined fixed date into your Recurring Deposit Account. The banks in
return give you interest at the rate applicable to Fixed Deposits. If you want to put your money in RD you need to open a Recurring Deposit Account with the
bank. You can give standing instructions to the bank to debit your savings
account every month and put that money in your RD account.
This
scheme is good for individuals who have a regular income. They can either be
salaried or earn a certain fixed amount every month. If you are a student and
are saving a certain amount every month from your pocket money then you too can
open a Recurring Deposit Account.
The
rate of interest you earn on your Recurring
Deposit may vary from bank to bank. Kindly do your research to find out
which bank is offering the best rate of
interest.
One
advantage with Recurring Deposit is
that you can open a Recurring Deposit account for as low as One Thousand Rupees
or maybe even Five Hundred Rupees. Please check with your bank for details.
1. FIXED DEPOSIT (FD):
A Fixed Deposit or FD as it
is popularly known, is an instrument offered by Banks and NBFCs. If you put
your money in FDs you are on your way to start your journey as an investor. The
Bank will give you a higher rate of interest than what you get in your regular
savings account. But you will have to wait till the maturity date. Yes, there
is a lock-in period in FD.
So, when you open an FD account they will
ask you the period for which you want to create the FD account. Based on that
they will tell you the amount you will receive on maturity.
If you already have a savings account in
the bank, there is no need for you to open a separate account for FD.
One drawback of FD compared to Recurring
Deposit discussed above is that in FD you need to have a big amount in hand to
invest, for you to earn a reasonably good interest. It's a fixed one-time
investment and that also for a fixed period. Maybe that's why its called a
Fixed Deposit.
The rate of interest for both, Recurring
Deposit and Fixed Deposit is the same. Senior Citizens (above 60 years of age)
are offered an additional interest rate on their investments.
1. MUTUAL FUND (MF):
Those who don't have a huge amount to
play the share market, Mutual Fund is a great way to be a part of stock
market action. It's also a great way to start making money work for you.
Mutual Fund
pools money from many investors and invests it in share market. Mutual Funds
are professionally managed funds. Each fund has a dedicated and experienced
Fund Manager who manages the collected fund and tries to maximize the
profits.
Say you are a salaried person. You can
spare as low as 1000 Rupees every month. Using this spare money you can become an investor. Mutual Fund offers an investment option where you can
invest a fixed amount every month. This is called a SIP or a Systematic
Investment Plan. Every month your money is used to buy certain units of the
Mutual Fund based on the prevailing NAV
(Net Asset Value). Just as in Share Market you have Share Price, in Mutual
Fund you have NAV. The units will be credited to your account and you can watch
it grow month after month.
A mutual fund is a slow and steady way of creating wealth. It's always a long-term game. The long-term can be as
long as 15 years and above. So, if you are looking at a get rich quick method
them Mutual Fund is surely not for you.
Mutual funds have advantages as well as disadvantages
compared to direct investment in the share market. I advise you to have a one
on one conversation with a Financial
Advisor. He will be able to guide you and help you start in Mutual Fund Investments.
In Conclusion
The tools you can use to make your money work for you are
evolving at a rapid pace in today’s market scenario. The above is not a
complete list. There are various other ways also to put your money to work.
What I have given above is
something a beginner, a novice who has no experience or little experience of
making his money work, can use it
and start getting the feel of how money can work for him.
Learning to make money work for
you is a slow process that can gain momentum as you become experienced by
practicing the art of making money work
for you.
Here’s what you need to
practice –
(a)
Create a financial goal
(b)
Put the money to work for you
(c)
Enjoy the process
(d)
Make it a habit
One day you should not be
surprised when you find out that your
money is making you more money than you make working on a job.
That will be the day when you
will attain the real Financial Freedom.
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