Money doesn't grow on trees. It can only be acquired by proper investment and planning. If you want to be a crorepati through legitimate means then you have to put your money in such savings instruments that will appreciate your investments as well as provide for financial security to your near ones in case of your untimelydemise.
Compounding is the oldest trick in the investment book and the best and smartest way to increase your returns. So you should take the advantage of compounding at an early age. Here are some tips to becomea crorepati, without changing your present life style.
When you start investing, insurance is the first thing that comes to your mind. It gives you safe returns as well as protection to your family. It's not always right that only the experts can master theprinciples of investing. Anyone can manage his or her investments.
All one has to do is to be cautious and not to take undue risks. In insurance there are several options. While all other insurance investments give a blend of insurance and investments, term insuranceplan gives a pure insurance option.
According to different term insurance plans, it costs you around Rs 2,500 per annum to get an insurance cover of Rs 10 lakh. However, if you will go for any endowment or whole life plans it will cost you awhopping Rs 25,000.
One should use the insurance policies for protecting his family. If you can save the nearly Rs 23,000 premium and put it in some better savings instruments like mutual funds which can give you a return of20-25 per cent in the long term.
Another important thing is to protect yourself from the growing medical expenses.
Every human being is exposed to various health hazards. Medical emergency can strike anyone without warning. You can lose all yoursavings if you don't have a health insurance policy.
If you are spending Rs 10,000 per annum on your health, you can reduce it significantly by paying only Rs 2,000 which can give you a healthinsurance policy worth Rs 1 lakh.
What it means is that not only do you save Rs 8,000 every year but your medical expenses are taken care of by the policy. In the long run if you invest this money in some saving instrument it can give youbetter returns.
If you will add the above two figures and calculate with a compound interest of 15 per cent, then it will come to around Rs 1 crore in 20years.
If you are moderate risk taker you can also invest in mutual funds rather than investing in pure debt funds. While, the debt funds give you a return of around 4-5 per cent, any mutual fund can give a higherreturn of around 20 per cent per annum.
You can also take the systematic investment plan (SIP) route. It won't make hole in you pocket as you need to invest a small amount everymonth.
If you start putting Rs 2,000 every month at the age of 25 then you will have around Rs 1 crore at the age of 50 (assuming an averageannual return of 10 per cent).
Today Indians are living longer and they are also facing difficulty to save money.
As government jobs are shrinking, more and more people are moving towards private sector jobs where there is little job security.
Thus, it has become inevitable to plan your retirements accordingly to meet your future expenses. Also investments can grow to a very large sum if you manage them effectively.
Pension plans are attractive investment vehicles for building up retirement savings, mainly because of their automatic re-balancingfeature and tax efficiency.
Generally, they maintain a 60-40 debt-equity allocation at all times, thus, reducing your headache of constantly re-balancing your portfolio. In pension plans you also have to shell out less premiums
than life insurance plans.
Once you understand where you stand financially and a rough idea of how you will get there where you want to go, then you can startearning from your investments which is called as passive income.