How many times have you heard your parents and relatives say: “It is very important to save money. Don’t spend all of it.”
That’s a very sage advice. But guess what? Simply saving money in a bank account is not enough. You need to go one step ahead. And that means to invest. Employing smart investment tips through a smart investment plan can make the difference between creating wealth and merely saving.
Why simply saving is not enough
Savings can help you meet a few financial goals. But in order to truly build your wealth over the long-term, it is important to invest utilise smart investment ideas to make money. Of course, there is a risk of losing money in investments, such as a smart investment in share market. But as an astute investor, it is possible to manage the risks and enjoy high returns.
How to make smart investment choices
Here are some tips you could follow to shift from saving to building wealth.
When you save your money in a bank account, the returns you earn can be very limited. For instance, most banks offer around 6-7% on fixed deposits. The interest rate on savings accounts is much lower at 3-4%.
And with inflation usually hovering between 4 and 5%, it is highly possible that your buying power reduces over time. In other words, your returns are eaten away by inflation.
Potential growth from investing
On the other hand, there are many investment avenues that offer greater returns to investors. Mutual funds offer returns anywhere between 10-15% per year. You can invest in debt funds, equity funds, Exchange traded Funds (ETFs), balanced funds and so on. Investing directly in the stock markets can help you earn much higher returns annually. So, based on your risk appetite and financial goals, you can choose to invest in any of these options to start building wealth.
Goal planning and investments
As you grow older, your financial responsibilities are bound to increase. Getting married and having kids can be emotionally wonderful. But it also means that your expenses start growing. Buying a new car, a new house, putting your kids in good schools and colleges are some of the major expenses that occur down the line.
With a fixed income and limited savings, it may not be possible to do justice to all these milestones. However, by creating a proper financial plan and investing for the long-term, you can slowly but steadily create a large corpus of wealth. And one by one, you can meet all your financial goals on time.
Start investing now
Many people wrongly assume that investments are only possible after you have saved a large amount of money. Yes, it is important to save first and then invest. But that doesn’t mean you need a huge amount to invest. You can start investing even with small sums of money
Many mutual funds allow investors to investors to invest as little as Rs 500 each month through SIPs. Here, the important thing is consistency. By investing month after month, you can really see the difference over a period of time. As your income and confidence grows, you can increase your SIP. And as your knowledge of the market grows, you can branch out and invest in other avenues too. Stocks, futures, options and gold are a few possible avenues.
As a young person, setting financial goals may be the last thing on your mind. However, that shouldn’t stop you from investing for long-term wealth creation. Remember, savings are good but investments are better.
Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.