How to be a millionaire?

Priyanka Sharma

07 Sep 2017

Untitled Document

An individual’s ultimate dream is to become a millionaire without breaking a sweat. Though this dream seems highly improbable, it is possible to become a millionaire and also have enough time to enjoy your life. All you require is the right strategy, discipline, and consistent savings.

There are certain areas where you can invest your savings and earn a significant amount of money.

Where can you invest?

The most important step towards becoming a millionaire is to inculcate the habit of saving money. Without savings, there won't be any investments, and without investments, there won't be any profits. Once you get into the habit of saving, you can invest the saved money in one or more of the following areas:

Real Estate

Real estate is the largest investment option. Your investment in real estate can rise in value over time. You may use this as a part of your overall strategy to  begin building wealth. Investing in real estate can prove to be the best investment if you are planning for long-term capital gain.

For example, if you buy a house or a land for Rs 30 lakh in 2017 (even after taking a loan for the same), the price of this land or house can go up to Rs 50 lakh within 5 years. You can earn a profit of Rs 20 lakh in just 5 years of time. Furthermore, you can invest this Rs 20 lakh in other investment options without losing the initial 30 lakhs that you invested.

Equity investments

Buying equities of a company means that you buy shares of a company and generally, retain them for a long period of time. By investing in a company, you become part-owner of that company and are entitled to cash benefits like dividends and bonuses. If the company is doing exceptionally well and the share price is at its peak, you can sell these shares in the market; thereby, reaping substantial profits.

For example, let’s assume that you have bought 1000 shares of ABC company at Rs 500 per share; this means that you have invested Rs 5,00,000 in the company. Until you sell these shares, the company is liable to give you a certain amount from its profits annually (called dividends). When the company is doing well in the market and the price of each share goes up (say, by Rs 1000); you have the option to sell these shares. On selling these shares at the higher value, you’ll be earning Rs 10,00,000 in total; thereby, making a profit of Rs 5,00,000.

Mutual Funds

Investing in mutual funds requires a considerable sum of money for investing. If you are looking for a more disciplined option to invest your savings, investing in mutual funds through a SIP (Systematic Investment Plan) is the best option.

A SIP is a flexible and an easy investment plan. Your money is automatically deducted from your bank account and is invested in a specific mutual fund scheme. Your mutual fund account is credited with the same units of value exact to the money you have invested.

Every time you invest more money, additional units of the funds are credited to your account.

Investing in mutual funds through SIP allows you to invest as low as Rs 500 per month in a mutual fund account; the rest is taken care of by the magic of compound interest.

For example, if you invest Rs 5,000 per month for 15 years and the expected return on an average is 12%, you could end up with Rs 25.22 lakh. If the expected return is 14%, this figure can become Rs 30.64 lakh. This is the magic of compounding. 

In the long run, this amount can prove to be really useful as you can choose to invest this amount in real estate or equities. By doing so, you can multiply this profit.

Derivative trading

Derivatives are financial contracts that derive their value from an underlying asset. These could be stocks, indices, commodities, currencies, exchange rates, or the rate of interest. These financial instruments help you make profits by betting on the future value of the underlying asset which is a financial instrument(such as stock, futures, a commodity, a currency, or an index) on which a derivative's price is based.

There are two types of derivative instruments:

a) Futures
b) Options.

Futures: It allows you to bet on future trends in the prices of an underlying instrument without paying the whole amount, but only a fraction of the value.

Options: It gives you an option to buy or sell the stock, commodity, or a debt instrument at the target price.

For example, if the price of a stock is Rs 100, and you expect it to go up to Rs 150 in a month’s time, then can you buy a contract of 1000 stocks at Rs 100 today (amounting to Rs 1,00,000), and agree to sell it at Rs 150 at the end of the month. Hence, you will gain Rs 50,000 (150*1000 – 100*1000).

These are some of the best options for you to invest in and fulfill your dream of becoming a millionaire.

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mutual-fund

Why to Choose Mutual Funds Instead of Directly Investing Into Equities?

Whether to invest in equities or mutual funds is a question that has plagued every investor. As someone who needs the best value for his/her investment should you invest in equity directly or via mutual funds?

Let’s start by first understanding what these two terms ‘equities’ and ‘mutual funds’ stand for-

Equities- Equities generally represent ownership of a company. If you own any equity in a company, you are a part owner of the said company (depending on how much equity you own).

Mutual Funds – It is an investment scheme which is professionally managed by an asset management company. It pools together the resources of a group of people and invests their money in equities, debentures, bonds and other securities.

Why choose mutual funds over equities?

For people who’ve never invested in either stocks or mutual funds, it is hard to know which is better and where to start. Broadly speaking, if you are a novice investor, mutual funds are not only less risky but also way easier to manage. Here are some ways in which investing in mutual funds is beneficial as opposed to investing in equities -

Diversification

Mutual funds provide more diversification as compared to an individual equity stock. When you invest in equity, you are investing in a single company which has its inherent risk. For example, if you invest Rs.20,000 in buying equities of one company, you could face a total loss if that particular company performs poorly in the market.  

If you invest the same amount in mutual funds, it will be invested in different kinds of stocks and financial instruments, high-risk and low-risk both, so you might not face total loss even if one company does poorly.

Scale of Investment and Lower Costs

For an individual investor buying and selling stocks is a difficult task due to its high price. Thus, any gains made from stock appreciation are nullified if the overall trading costs are considered. Comparatively with mutual funds, as the money is pooled from a large number of investors, the cost per individual is lowered.  

Another advantage of mutual funds is that you don’t need to invest large sums of money. Buying equities for a profitable venture needs huge amounts of money, a minimum of few lakhs. With mutual funds, you can start with Rs.1000 and earn profits on that as well.

Convenience

Keeping an eye on the markets everyday is a time-consuming business, especially if you are investing as a side gig. There are people who spend their lives studying the market and still end up sustaining heavy losses. Though investing in mutual funds does not guarantee high returns, it is stress-free and needs less work as compared to investing in equities.

To sum it up

It is important to remember that mutual funds have their own disadvantages as well. Thus, as with any financial decision, educating yourself and understanding the suitability of all the available options is the ideal way to invest. 


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How to be a millionaire?

Priyanka Sharma

07 Sep 2017

Untitled Document

An individual’s ultimate dream is to become a millionaire without breaking a sweat. Though this dream seems highly improbable, it is possible to become a millionaire and also have enough time to enjoy your life. All you require is the right strategy, discipline, and consistent savings.

There are certain areas where you can invest your savings and earn a significant amount of money.

Where can you invest?

The most important step towards becoming a millionaire is to inculcate the habit of saving money. Without savings, there won't be any investments, and without investments, there won't be any profits. Once you get into the habit of saving, you can invest the saved money in one or more of the following areas:

Real Estate

Real estate is the largest investment option. Your investment in real estate can rise in value over time. You may use this as a part of your overall strategy to  begin building wealth. Investing in real estate can prove to be the best investment if you are planning for long-term capital gain.

For example, if you buy a house or a land for Rs 30 lakh in 2017 (even after taking a loan for the same), the price of this land or house can go up to Rs 50 lakh within 5 years. You can earn a profit of Rs 20 lakh in just 5 years of time. Furthermore, you can invest this Rs 20 lakh in other investment options without losing the initial 30 lakhs that you invested.

Equity investments

Buying equities of a company means that you buy shares of a company and generally, retain them for a long period of time. By investing in a company, you become part-owner of that company and are entitled to cash benefits like dividends and bonuses. If the company is doing exceptionally well and the share price is at its peak, you can sell these shares in the market; thereby, reaping substantial profits.

For example, let’s assume that you have bought 1000 shares of ABC company at Rs 500 per share; this means that you have invested Rs 5,00,000 in the company. Until you sell these shares, the company is liable to give you a certain amount from its profits annually (called dividends). When the company is doing well in the market and the price of each share goes up (say, by Rs 1000); you have the option to sell these shares. On selling these shares at the higher value, you’ll be earning Rs 10,00,000 in total; thereby, making a profit of Rs 5,00,000.

Mutual Funds

Investing in mutual funds requires a considerable sum of money for investing. If you are looking for a more disciplined option to invest your savings, investing in mutual funds through a SIP (Systematic Investment Plan) is the best option.

A SIP is a flexible and an easy investment plan. Your money is automatically deducted from your bank account and is invested in a specific mutual fund scheme. Your mutual fund account is credited with the same units of value exact to the money you have invested.

Every time you invest more money, additional units of the funds are credited to your account.

Investing in mutual funds through SIP allows you to invest as low as Rs 500 per month in a mutual fund account; the rest is taken care of by the magic of compound interest.

For example, if you invest Rs 5,000 per month for 15 years and the expected return on an average is 12%, you could end up with Rs 25.22 lakh. If the expected return is 14%, this figure can become Rs 30.64 lakh. This is the magic of compounding. 

In the long run, this amount can prove to be really useful as you can choose to invest this amount in real estate or equities. By doing so, you can multiply this profit.

Derivative trading

Derivatives are financial contracts that derive their value from an underlying asset. These could be stocks, indices, commodities, currencies, exchange rates, or the rate of interest. These financial instruments help you make profits by betting on the future value of the underlying asset which is a financial instrument(such as stock, futures, a commodity, a currency, or an index) on which a derivative's price is based.

There are two types of derivative instruments:

a) Futures
b) Options.

Futures: It allows you to bet on future trends in the prices of an underlying instrument without paying the whole amount, but only a fraction of the value.

Options: It gives you an option to buy or sell the stock, commodity, or a debt instrument at the target price.

For example, if the price of a stock is Rs 100, and you expect it to go up to Rs 150 in a month’s time, then can you buy a contract of 1000 stocks at Rs 100 today (amounting to Rs 1,00,000), and agree to sell it at Rs 150 at the end of the month. Hence, you will gain Rs 50,000 (150*1000 – 100*1000).

These are some of the best options for you to invest in and fulfill your dream of becoming a millionaire.

Have Referral Code?