Idle Mind and Idle Money- Both are devious !

Welcome to Goodwill Investors’ Education Initiative!

“Save for the rainy days !” is a proverb often quoted by our elders. So whatever is the level of income that we earn today has to be planned well for both expenditures and investments. There is always a distinction we have to make between our ‘wants’ and ‘needs’. This will help us to be careful while spending and thus paving way for Investments.

We always emphasize the need for proper asset allocation and asset diversification. If these two are done with a strategy, then money-multiplication becomes possible. Income is always divided into two types-1. Active Income. 2. Passive Income. First one is that comes by our seamless working and taking up assignments. The second one is that which comes out of our past investments like rent from a building, Interest income from bank deposits, dividend from shares, yield from Govt. securities etc., When we steadily grow old, our ability to earn active income reduces. And hence we should steadily invest in such assets which would give us seamlessly a passive income automatically.

While a major portion of our earnings will go to fixed assets like house, Gold etc., we will also tend to invest in fixed Income category. Like Bank FDs, Govt. Bonds, Post office deposits, Debentures, Company deposits etc., It is also advisable to invest in Mutual Funds and shares of good and well-known companies a small percentage of our surplus say 20 %. Which will give us not only a good return but also offer capital appreciation?

Now the rate of interest in the economy is at a multi-year high level now, it is prudent to look into debt funds with a medium to long-term investment horizon. While investing in debt funds or money market instruments like Govt. securities, bonds, treasury bills, Certificate of deposits, commercial papers etc., the assured return at the prevailing market rate of interest or yield is assured, that too on a short term.

While risk is inherent in any investment, here the risk is very less or in fact zero in case of Govt. bonds and gilt-edged bonds. Liquid funds are extremely short-term in nature and hence liquidity is there.

Similarly, Mutual funds which are open-ended and similar debt funds provide high liquidity whereas close-ended funds have a lock-in period of say three years. One has to calculate the entry load and exit load while investing in such funds apart from Income tax implications.

So invest, it is never too late! Start just now!

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