Investment Opportunities Other Than FDs for Fixed Income People
Unless you are a businessman or a self-employed person, the chances are high that you run on a fixed income clock. This means that there aren’t any other income sources that you can use to improve your lifestyle. Don’t worry! 90% of working population in this world are fixed income people that’s because most people in this world look for a stable lifestyle and prefer grabbing a stable job that will provide for them and their families, help them enjoy a family vacation in a year or two, pay off utility bills and yes, have enough savings that will help them spend somewhat freely during big festivals.
Most of these people (and that includes you too) consider only one thing – ‘salary increases over years’. Absolutely right! But there is a teeny-tiny problem. Did you consider inflation in India? Most likely no! The reason usually everyone avoids this factor is that there are too many variables to consider and making projections about future inflation rates is not only a herculean task in hand but is also significantly risk and requires enormous amounts of foresight and understanding of how economy works. Most people don’t understand that.
Now that we know the underlying problem, it is time that we take a look at one unique behavior of fixed income people. They all intend to invest their savings in Fixed Deposits. Why so? Well, that’s more like a hereditary issue. Our fathers and grandfathers have done the same and that kind of worked for them. It is a proven and time-tested investment avenue and hence, the first choice for everyone.
Again – a teeny-tiny problem! Times have changed. Technology is improving in leaps and bounds and hence, the lifestyle is changing way more rapidly than it was about two decades back. And, we are slaves of capitalism. They throw breads and we fight to grab a bite. That’s how it has always been. Almost every month there is something new on the shelves and we just happen nurture a feeling that our lives are impossible without that new thing on shelf. That’s human nature.
The question is: “Is a fixed deposit capable of fulfilling our unrealistic ‘cannot-live-without’ needs?” The simple answer to this question is a single word – NO!
You see, the problem with fixed deposits is that they don’t generate a regular revenue stream, which is paramount when it comes to fulfilling our not-really-necessary needs. So, what to do? This is where you ask the question, ‘What are the various investment opportunities other than FDs for fixed income people?‘
Let us find out…
Mutual Funds: Mutual fund is one of the most revolutionary financial products in market. They are relatively safer even though they work with volatile markets. MFs actually invest more in debt instruments compared to equity instruments. Equity market is far more volatile than debt market and hence, when a major chunk of the money is invested in debt market, the risks of volatile equity market are offset significantly. On top of that, MFs come with minimal locking period unlike fixed deposits, allowing people to withdraw the invested money very quickly. Please read How to choose Mutual Funds
SIPs: SIPs or systematic investment plans are variations of mutual funds where monthly dividend earnings are possible on the investment amount. The mutual fund company invests the money from the investors and earn profits from markets. A portion of this profit is paid out to the investors in form of dividends. In case an investor decides not to withdraw the dividends, he or she can ask for reinvestment of earned dividends. This will allow compounded growth of investment. Also SIP allows a very small amount of investment on a regular basis with no commitment whatsoever. One can decide to close SIP investments and continue with basic MF. Read More about SIP.
ELSS: ELSS or equity linked savings scheme is another variant of mutual fund with maximum tax exemption benefits with a lock in period of years. On top of that, they also allow SIP investments to maximize returns. This is perfect for those who want to save (in form of tax savings) and earn (in form of capital growth) at the same time. Read about Best ELSS to Invest.
Share trading: Yes, many people think of it as a risky proposition and they are not wrong. Trading directly in share market can be one hell of a risk. That’s the reason why, it is suggest that people trade in Blue Chip companies whose shares usually show a steady growth pattern without much erratic fluctuations. Playing nicely can actually lead to good income but investment in Blue Chips is usually a long-term game. For those who want quick returns, it is perfectly natural for them to go for anything else other than Blue Chips. This however requires immense amount of market study, understanding of various tools that help investors to predict market movements, capability of analyzing data quickly and making quick decisions. This is risky but everyone knows – No risks, no gains. There are people who have literally become millionaires simply by day trading and again there are people who have lost millions in share market. There are many factors to consider and most important one is – controlling greed. We don’t really recommend investing in share markets unless you are comfortable taking risks and you are ready to lose money at times. Otherwise, simply forget this option!. Read more about Equity.
Insurance plans: There are several types of insurance plans that allow monthly payouts in addition to offering life insurance cover and tax savings. This is one good area to consider because of the three-fold benefits. Read about Best Term Insurance Plans.
Retirement plans: Just like insurance plans, there are some retirement plans as well which allow monthly payouts after a certain period of time. There is no insurance cover of course but there is tax savings. Some retirement plans are linked to share markets and hence, they actually offer capital growth throughout maturity period. Read about things you must do before retiring.
That’s pretty much everything. Anyone with a fixed income can invest in any of the aforementioned options. However, one thing that everyone needs to keep in mind is that any investment that is linked to the markets are always subject to risks and yes, at times of economic collapse, everyone stands a loser!