Article

Season’s Greetings! Here are 5 Investment Ideas to Make You Rich!

05 Nov 2018

For the trading community, Diwali marks the start of a new Samvat year, which is 56.7 years ahead of the Gregorian calendar. Considering how auspicious the occasion of Diwali is, let us look at five street-smart investment ideas to make you rich.

When we think of getting rich, we normally think about multi-bagger stocks and handy tips. But getting rich is much beyond that. This Diwali, let us look at safer and surer ways of making you rich.

Start with Eliminating High-Cost Debt

The standard refrain here usually is, “How does reducing debt make me rich?” Let us look at it pragmatically.

How much interest do you pay on a personal loan or outstanding credit card dues? Normally, you pay around 18% on your personal loan and 35% annually on your credit card. If you service that kind of debt obligation on a regular basis, then it is unlikely that you will ever get rich. Whatever you earn will only be sufficient to defray your loan servicing and there will be little left to create wealth.

Let us look at it differently. When you repay your credit card loan, which bears 35% annual interest, it is almost equivalent to earning 35% annual returns on your investment. How many investment options do you have that give 35% returns annually? Frankly, not many! Repaying your credit card is like earning an assured return of 35%. That surely makes a lot of investment sense.

Ensure That You Are Insured; Adequately

Insurance is a safety net and does not make you rich. However, when you are insured, it ensures a peace of mind that also increases your risk-bearing capacity. If you have created a portfolio of Rs40 lakh but do not have a life cover for your family in your absence, then the entire point of wealth creation is defeated. This is because there is no risk management built into it.

Ensure medical insurance for you and your family. You can have floaters which are more economical. But don’t let hospitalization costs eat into your core investment corpus. That is not a smart way to get rich. Also, ensure that you have insurance for your assets and liabilities so that neither becomes a burden. Your investments can make you rich only if your risks are adequately covered with low-cost pure-risk covers.

Plan to Get Rich by Articulating Your Goals

It is said that if you don’t know where you want to reach, then it does not matter how fast you run. Hence, before anything, you need to start by articulating your long-term goals, give them a financial value, and then tag equity SIPs to long-term goals and debt SIPs to short-term goals. Start with your long-term financial plan and work your investments backward.

Focus on Equity for the Long-Term

We all know that taking risk is the key to getting rich. But there is another aspect to this. The biggest risk that we all run is not taking any risk. If you invest your long-term funds, which you’ll need after 20 years, into a liquid fund, then you are running the risk of not taking any risk.

If you want to get rich, you have to take risk with equities. Of course, you need to select stocks in a discerning way. Be regular and think long-term, wealth creation will follow.

Start a Systematic Investment Plan

If you want to get rich after 25 years, then you need to start planning today. As Euclid said, “There is no royal route to geometry”. Similarly, there is no royal route to wealth creation and it has to be done gradually. The beauty of an SIP is that it is a true-blue wealth creator.

Your monthly contribution may appear to be small at first, but then the wealth creation can be huge if the funds are invested in the right assets, in the right manner, and for the right amount of time, i.e. long-term.

Still don’t believe in the power of compound interest? Check the example below to see how an SIP investment of Rs5,000 per month grows over time.

Returns

10-year SIP

15-year SIP

20-year SIP

25-year SIP

10% CAGR

Rs10.3 lakh

Rs20.9 lakh

Rs38.3 lakh

Rs66.9 lakh

12% CAGR

Rs11.6 lakh

Rs25.2 lakh

Rs50 lakh

Rs94.9 lakh

15% CAGR

Rs13.9 lakh

Rs33.8 lakh

Rs75.8 lakh

Rs164.0 lakh

The moral of the SIP story can be interpreted from this table. If you sustain an SIP for a longer period, then even a small investment of Rs5000 per month can make you a crorepati (billionaire) in 25 years. It surely feels good to hear that and it is not too complicated either. An SIP gives you the advantage of rupee cost averaging which helps you beat volatility over time and multiply everything through the amazing power of compounding.

This is a sure-fire way of starting on your road to wealth. Don’t you think so? How about starting on this journey this Diwali?

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Season’s Greetings! Here are 5 Investment Ideas to Make You Rich!

05 Nov 2018

For the trading community, Diwali marks the start of a new Samvat year, which is 56.7 years ahead of the Gregorian calendar. Considering how auspicious the occasion of Diwali is, let us look at five street-smart investment ideas to make you rich.

When we think of getting rich, we normally think about multi-bagger stocks and handy tips. But getting rich is much beyond that. This Diwali, let us look at safer and surer ways of making you rich.

Start with Eliminating High-Cost Debt

The standard refrain here usually is, “How does reducing debt make me rich?” Let us look at it pragmatically.

How much interest do you pay on a personal loan or outstanding credit card dues? Normally, you pay around 18% on your personal loan and 35% annually on your credit card. If you service that kind of debt obligation on a regular basis, then it is unlikely that you will ever get rich. Whatever you earn will only be sufficient to defray your loan servicing and there will be little left to create wealth.

Let us look at it differently. When you repay your credit card loan, which bears 35% annual interest, it is almost equivalent to earning 35% annual returns on your investment. How many investment options do you have that give 35% returns annually? Frankly, not many! Repaying your credit card is like earning an assured return of 35%. That surely makes a lot of investment sense.

Ensure That You Are Insured; Adequately

Insurance is a safety net and does not make you rich. However, when you are insured, it ensures a peace of mind that also increases your risk-bearing capacity. If you have created a portfolio of Rs40 lakh but do not have a life cover for your family in your absence, then the entire point of wealth creation is defeated. This is because there is no risk management built into it.

Ensure medical insurance for you and your family. You can have floaters which are more economical. But don’t let hospitalization costs eat into your core investment corpus. That is not a smart way to get rich. Also, ensure that you have insurance for your assets and liabilities so that neither becomes a burden. Your investments can make you rich only if your risks are adequately covered with low-cost pure-risk covers.

Plan to Get Rich by Articulating Your Goals

It is said that if you don’t know where you want to reach, then it does not matter how fast you run. Hence, before anything, you need to start by articulating your long-term goals, give them a financial value, and then tag equity SIPs to long-term goals and debt SIPs to short-term goals. Start with your long-term financial plan and work your investments backward.

Focus on Equity for the Long-Term

We all know that taking risk is the key to getting rich. But there is another aspect to this. The biggest risk that we all run is not taking any risk. If you invest your long-term funds, which you’ll need after 20 years, into a liquid fund, then you are running the risk of not taking any risk.

If you want to get rich, you have to take risk with equities. Of course, you need to select stocks in a discerning way. Be regular and think long-term, wealth creation will follow.

Start a Systematic Investment Plan

If you want to get rich after 25 years, then you need to start planning today. As Euclid said, “There is no royal route to geometry”. Similarly, there is no royal route to wealth creation and it has to be done gradually. The beauty of an SIP is that it is a true-blue wealth creator.

Your monthly contribution may appear to be small at first, but then the wealth creation can be huge if the funds are invested in the right assets, in the right manner, and for the right amount of time, i.e. long-term.

Still don’t believe in the power of compound interest? Check the example below to see how an SIP investment of Rs5,000 per month grows over time.

Returns

10-year SIP

15-year SIP

20-year SIP

25-year SIP

10% CAGR

Rs10.3 lakh

Rs20.9 lakh

Rs38.3 lakh

Rs66.9 lakh

12% CAGR

Rs11.6 lakh

Rs25.2 lakh

Rs50 lakh

Rs94.9 lakh

15% CAGR

Rs13.9 lakh

Rs33.8 lakh

Rs75.8 lakh

Rs164.0 lakh

The moral of the SIP story can be interpreted from this table. If you sustain an SIP for a longer period, then even a small investment of Rs5000 per month can make you a crorepati (billionaire) in 25 years. It surely feels good to hear that and it is not too complicated either. An SIP gives you the advantage of rupee cost averaging which helps you beat volatility over time and multiply everything through the amazing power of compounding.

This is a sure-fire way of starting on your road to wealth. Don’t you think so? How about starting on this journey this Diwali?