Money grows only with investments and never just by savings alone. The objective of the investment is to get more out of the money you have, and the purpose, channel, duration, and amount is unique for everyone. With the ever-increasing penetration of the internet in our daily lives and the information boom that it has brought, more and more people are active about investing after having surveyed all the options available. Now the importance is more on investing rather than saving. But this doesn’t rule out the fact that even saving is also important. Investment means spending to buy something which has the potential to increase the value of money with time like a policy, an asset, or a commodity. The ultimate motive remains to increase the worth of the current money over time.
Investment is a personal choice and depends on the individual’s choice and capability amount, duration of investment, and the risk appetite. To be a successful investor and earn on the investment, one should follow certain principles, which are also called “Thumb Rules of Investment”. These thumb rules answer all questions about investment and make investing an easy affair. But still, the question that remains is, which is the best way to invest money?
Find Lower Cost Ways to Invest
It’s easy to ignore investment expenses during bull markets – especially if you’re making money. However, the impact of those expenses can really add up over time, and not in a good way.
In fact, lowering your expenses just 1% can make a huge difference in the performance of your investment portfolio over the long-term. Let’s say that you’re earning an average of 10% per year on your portfolio but paying 2% in investment fees of all types. That will leave you with a net rate of return of 8%. If your portfolio is $100,000, it will grow to $466,097 after 20 years.
PPF ( Public Provident Fund )
PPF stands for Public Provident Fund. PPF investment offers investors a lot of flexibility like the account can be opened in a post office branch or a bank. The maximum amount that can be invested in a year is Rs 1.5 lakhs. This can be done as a lump sum or as installments on any working day of the year. The PPF account matures in 15 years and can be extended in blocks of five years each. The PPF account also offers liquidity to the investor.
Take Advantage of Tax-Efficient Investing
Like investment expenses, income taxes on your investment earnings have a substantial impact on the performance of your portfolio. While it’s not usually possible to make them go away completely (unless of course, you are investing in a tax-sheltered plan, like an IRA), it’s very possible and absolutely necessary to minimize investment taxes wherever possible.
One of the best ways to do this is to avoid heavy trading. Trading generates capital gains, and capital gains result in capital gains taxes. Those taxes – along with all of the trading fees involved – can result in a portfolio that doesn’t perform materially better than a buy-and-hold model that’s invested primarily in funds.
And speaking of funds, you should favour index-based exchange-traded funds (ETFs). Since such funds are tied to the underlying index, they only trade stocks when the index changes. That means that they trade stocks far less than actively managed mutual funds. That minimizes your capital gains, which ultimately minimizes capital gains taxes.
Tune-Out the “Experts”
Have you ever heard an expert confidently predict that the Dow is going to 25,000 – or crashing down to 5,000? Ignore them. “Experts” who make claims like that are nothing but crystal ball gazers. They have no more insight as to where the market is heading than you or anyone else, but they sure think they do.
But that does not mean that they are harmless. Since they deal primarily in hyperbole, they can get your attention easily. After all, no one ever wants to get caught napping while big things are happening. And if a self-styled expert can cast himself as credible, you may just decide that he is someone who knows what is really going on.
If you want to be a successful investor, particularly on a long-term basis, you will have to learn how to tune out this kind of chatter. All it does is distract you from your own investment goals and strategies, and that won’t help you in the long run.
Probably the worst delusion that can affect any investor is the “get rich quick” mentality. It is especially hard to resist during bull markets. Everywhere you look, there are experts promising that you can double or triple your money in just one or two years by following their plan. It is utter nonsense!
Like paying off a mortgage, building a career, or raising a child, successful investing requires both time and patience. You should never measure your time horizon in months, or even years – but rather in decades. By investing $10,000 per year in an index fund with an average rate of return of 8% over 30 years you will accumulate nearly $1.25 million. That may not be get-rich-quick, but it is a way to get rich – and that is what really counts.
Gold is Gold! And we Indians are very much attracted to it and have an affinity for accumulating it. In India, Gold has more emotional value rather than economic value. In India, gold passes on in generations. Though investment in gold has lost its capability but is still recommended by financial experts to invest 5-7% of your monthly income because gold is considered as a hedge against inflation and it also acts as a medium of exchange during economic crises. There are many options that are available to prospective investors to make an investment in gold via investing in physical gold, gold coins, and Gold Bars, Electronic Gold, etc.