Invest with investigation and relax
Investing to live life without financial fear should be a well-thought decision. Invest with investigation and relax. You will agree with me when I say that life is filled with lots of ups and downs, do not let financial fear disturb your dreams. Investing in your savings is the only way you can help yourself to achieve your dreams. Plan ahead, carefully invest with a goal in mind to carry on the activities, fun, enjoyment with your family and friends. Live life the way you want it to be despite your retirement.
We all have fears in our minds like
what will happen if I lose my job today?
Will I be able to meet my retirement expenses?
Will I be able to meet the future education expenses of my children and so on. The best way to overcome your fears related to meeting future expenses is to have a structured investment plan in place. Investigate before investing and relax. Invest wisely with a clear picture of what your investments will deliver whenever you need them the most. Once you have invested Monitoring your investments from time to time is important to check if the investment returns are as per expectations. If not, do not hesitate to switch and re-invest into a proper product that delivers better returns.
Some of the key points that you need to keep in mind while Investing are
- what is the purpose of the investment?
- which is the right product for investment?
- How much investment should go into which product?
- Can the investment deliver the desired or expected returns?
- How can you monitor your investments as and when you want to?
- How liquid is your investment? liquidity means the ability to turn your investments into cash when you need it urgently.
- Do you know the charges on the investment while investing and withdrawing?
- what are the taxes payable while withdrawing money?
- what is the experience of the financial advisor guiding your investments?
- Needless to say, you should clearly know the risk the investment carries? (ex:- Is my principal investment at risk?)
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Why should I invest or save money?
Sanjay is an employee of a major corporate company and he says “I spend my entire salary on the monthly expenditure and I am happy, enjoying my life Why should I invest or save money?
let’s find an answer to the below questions to answer sanjay question
who will take care of the monthly expenses if you suddenly fall ill after a couple of years and are unable to go to work?
What if you have lost your job suddenly due to recession or had a loss in business?
How can you buy that dream house or car which you are passionate about?
How can you take your family on a vacation to build bonding and also relieve yourself from work stress?
Assuming a life expectancy of 85 years, do you have sufficient corpus to meet your retirement needs?
Obviously, if Sanjay is spending all the money he earns and not investing he will not be able to meet his future financial requirements.
To tell you a fact, What you do with your money matters to you the most as it definitely impacts the future quality of life. We need money at every point in our life to address several needs. one need that every one of you will have to go through is retirement.
Having said so, have you invested enough money for your future retirement?
What are the unforeseen expenses that you imagine is creating restlessness in your mind?
Everyone is seeking an answer to this uncertainty, especially younger ones.
Surprisingly Individuals give imaginary figures regarding retirement corpus as most of them are not clear about the amount they need to retire.
In fact, our parents told us to study well get a good job, earn money and become independent.
Moreover, they said we should concentrate only on studies and they will take care of all the expenses. Undeniably, their intention while saying so is to keep us focused on our studies.
Old methods of investing
As a result, we graduated and turned into good employees for an organization or businessmen. For the first time in our life, we start seeing our hard-earned money in our bank accounts which in itself brings excitement and joy. As soon as we start earning money working post studies, we would like to invest but old methods of investing are giving lesser returns. As a result of our concentration only on studies, we know less about managing money. Because we are not aware of the financial instruments in the market we would generally depend upon others to make a decision for us which may or may not give the desired results. why so? The individual that you approached might have his own impression of financial products, therefore, getting an informed decision is a challenge.
Hence the need for an informed decision in the right financial investment products arises which serves the purpose of achieving our future goals, therefore, it is necessary to Invest with investigation and relax.
What should we look at in an investment product?
When we buy a new soap from a shop we smell the fragrance, check the price, ingredients and then purchase it similarly what can we look in an investment product? before buying one. We should have clarity in our thought of what we wish to do by investing in a product or service. We should always give serious thought to investing with a goal in mind and not casually.
Specifically speaking the product that we are investing in should give us the desired returns to meet our future goals.
Every one of us has our own dreams and goals which we are passionate about, therefore it is important to specifically match each goal to an investment with a clear understanding of how the investment will deliver.
Rahul a 30-year young employee who is married draws a net salary of Rs 56000/- per month. Particularly he is looking for an investment solution to meet future goals. Apart from current monthly expenses of Rs 25000/- his future goals include buying a car, house, accumulating a corpus for his daughter’s education and marriage and building a corpus for retirement.
Equally important, as an employee Rahul needs to have an emergency fund that is equal to 6 month’s salary so that if at all he loses his job the emergency fund would come in handy to ensure that his lifestyle does not get affected before he lands into another job. In addition, he also needs to purchase a Family Health insurance and Term Insurance to secure himself and his family from unforeseen risks.
Pathway to Save, Invest and Relax
It important to have a clear view of where Rahul investment is going and what is the end corpus it will deliver. so, what is the pathway to save, invest and relax? For Instance, let us look at the below table to check what is the amount required to be saved in SIP month on month to meet his future goals.
| Present | Purchase | Future value cost | SIP | ||
| S.no | Future Goals | Value | After years | of same need | Invest |
| 1 | Current cost of car | 500000 | 5 | 596274 | 7352 |
| 2 | Current cost of higher Education | 1000000 | 15 | 2759032 | 5737 |
| 3 | Current cost of Marriage | 2000000 | 20 | 5518063 | 11594 |
| 4 | Current cost of house | 3600000 | 20 | 13930864 | 15213 |
| 5 | Retirement corpus based on current yearly expenses (rent,Groceries etc.) | 300000 | 30 | 75469622 | 21556 |
| Total | 7400000 | 98273855 | 61452 | ||
| 6 | Current monthly expenses | 25000 | |||
| Final Total | 86452 |
As shown above in the table firstly you will find the current cost of the goal in the present value column.
The next column specifically states the number of years after which you would like to accomplish the goal.
The third column states the future value cost of the same goal purchased after certain years(as mentioned in the second column) considering 7% inflation and 12% returns.
Lastly, the value of SIP investment that you need to purchase month on month to achieve the goal is mentioned.
Investing in sip to achieve goals.
will explain the above illustration in detail to understand one of Rahul’s options by investing in sip to achieve goals. The cost of car in the year Rahul was planning to purchase a car is Rs 500000/- , since he did not have that much money the option is to invest in SIP Rs 7352/- month on month so that it arrives at a cost of the car of Rs 5,96,274/- (due to 7% inflation) post 5 years.
As can been seen from the above table, the cost of several needs and expenses increase due to inflation. In order to fulfill your dreams, you need to invest in small amounts through a Systematic Investment Plan(SIP).
From the Final total of Rs 86452 If you reduce Rahul net salary of 56000, You would arrive at a balance of Rs 30452. Rahul needs Rs 30452/- additionally to invest for the purpose of achieving his future goals.
How can Rahul manage or earn the additional amount to invest
Nevertheless, the fact is Rahul is a human being, the maximum amount of time that he can work per day is 8-10 hrs. Needless to say, he is spending the entire time to work professionally to earn money for his livelihood. In that case, how can Rahul manage or earn the additional amount to invest that is discussed above.
let us look at some of the options that he can choose from
Firstly, he can utilize his yearly bonus towards investment
secondly, he can invest his yearly increments and incentives
Thirdly, he can utilize his weekend Saturdays to take up additional job works
Subsequently, he can search for other companies looking for talent that pay well and switch jobs
By doing so not only can he open new opportunities to earning but also meet his investment need.
To sum up, SIP investment in mutual funds is a simpler and easier way to fulfill our goals. Every investor can plan his short term goals and long term goals and specifically invest to generate good returns thereafter achieve his objective of investment. By investing small amounts there is no pressure on us as it is a comfortable and easy way. At the same time monitoring the progress is easy as we can see the fund performance daily. Since one can withdraw money from the mutual fund any time liquidation is not a concern.
Is Investment in real Estate a good option?
Many invest in real estate but is an investment in real estate a good option. let us try to clearly understand this.
Real Estate investment can be classified into 3 categories,
residential plots, residential flats, commercial property.
Residential plots:-
By and large, people invest in Residential plots for two purposes. Firstly to construct a dream house for living.
Secondly for the purpose of appreciation of property to sell it off at a later period to make a profit. Spending solid cash for the construction of a house is not a good option as it blocks a lot of money from circulation instead takes a loan. By purchasing a mutual fund with SWP you can re-pay the house installments thus rotating the money. Here one should keep in mind that gains arising through the sale of residential plots attract capital gains tax if the same is not re-invested in real estate again.
Generally, investment in residential plots yields a return of 9-12% over a period of time.
Needless to say that there should be good development happening in the location where the plot is purchased.
Although in some locations profits in real estate gained 30% profit due to overall demand based on development. A point often overlooked is the liquidation of a residential plot takes time as you have to wait for a buyer to purchase at the price you expect. so, if you have an emergency and want to sell it off you may have to sell at a lesser price than expected. While it may be true that investing in real estate is a profitable option one has to carefully evaluate the location demand before investing.
Residential Flat
- If you have spare money purchasing of Residential flat in a good location is an option. For example, let us say you have purchased a flat worth 60 lakhs which would generate month on a monthly rent of 20000/- at 4% of purchase value accumulating to Rs 2,40,000 per year as Rent. You estimate that the price of the flat will double in 8 years than the return from investment is 9%. In 8 years you would have taken rent of Rs 19,20,000 from the user therefore if you add up the profit 60 lakhs + 19.20 lakh rent = 89.20 lakh is the total profit given the condition the flat appreciates as per estimated level. Rent is taxable under income in whatever slab the taxpayer is in.
- Why a residential property – flat?
- The residential tax is less.
- Residential properties(flats) are available at a fair valuation currently due to the demand-supply gap.
- let’s look at the below report to understand the real estate demand and supply in India.
- References: Media Reports, Press releases, Knight Frank India, VCCEdge, JLL Research, CREDAI-J – source -IBEF
Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.
- By purchasing flat on cash, one can bargain for a better price.
- In India, a residential property appreciates by 9% per year in most places. ( except metros) where appreciation is less), If the property appreciates at 9% the investment doubles in 8 years even after rent withdrawals. one can sell the property Post 8–9 years if need be.
- Given the above points, if you have spare money as an investment then investing in a flat is also a good option.
- Invest and relax as this is an immovable property where the minimum return is guaranteed.
commercial property
Investment in commercial property should be done only when you have spare money otherwise it is not a good option. Due to cost-cutting most of the companies are moving into smaller offices which created a demand for commercial property but then the price at which the property is rented matters in generating returns. In any case, commercial rentals are high therefore the income generated is also high even though the purchase price is high over the long run it fetches. Invest in commercial property with a long view rather than a short one.
To summarize on real estate investment, it is advisable to evaluate the location, price, and demand before taking a decision. One has to view real estate investment from a long term capital appreciation perspective. Purchasing residential flats or commercial flats should be done only if you have spare money. All real estate investment gains attract capital gains tax, you should properly calculate the tax implications on the returns generated.
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