Investments in 2022 more profitable then money in banks
Other investments to make more profit with the money saved in banks
Rich people don’t keep their money in bank accounts, but rather make investments and put their money to work to earn for them. This article will be convincing you that why shouldn’t be just putting money in a bank account and rather be investing. It’s bad enough to deposit your money into a bank account and earn essentially zero interest on it, or in some countries, even having a negative interest rate.
Smart investors cum business people know how to use their money to leverage their wealth and hence collect more amount of loans from banks against just saving money in banks. And, they know to indeed remain wealthy it is important to bet money on varied other investments rather than saving in banks because it is the dumbest ever decision one can do.
To minimize the tax runs and to protect your money from the government, it is a smart choice to minimize the amount of money in bank accounts. A scary truth is, that banks add just a little amount of interest on saving accounts, but when inflation hits the interest and a part of saving is completely wiped out. Feared individuals seek for other alternatives to park in their funds due to mistrust in banks and many other financial institutions.
Meanwhile, every individual has to understand that investing money in different schemes and businesses is a crucial part of wealth building. Instead of letting the money be idle in bank accounts, put it to works by investing in different avenues like stocks, fixed deposits, equities, and mutual funds. Ever since the pandemic hit, we have seen the growth of shareholding schemes, equity, and mutual fund investments through various platforms and apps. It became the need of time to make a varied investment for higher returns as everything came to halt for a much longer period than expected.
But don’t get this opinion wrong, saving your money in banks through various saving packages is not a bad idea especially when you are completely clueless about what to do with the money, or have fear of taking the risks that any business requires. Fixed deposits and postal schemes can accrue a good amount of interest on your money but the fact of investing is, “make your investment in the right business and get far better returns than that you get from saving in banks.”
Even if you wish to start from zero, you might achieve your financial goals and stability. There is no right or wrong way for investment, they are done only by making smart choices, which predominantly are judged by knowledge about investment, taxing, money allocations, and return policies. The fundamental way to grow is to learn and learn wisely.
Investors need to know what they are compromising on. When we talk about Indians, they want it safe and secured but also want higher returns, which isn’t the ideal situation. Every year there is a huge surge in fixed deposits in banks and other finance companies.
Wisely, fixed deposits are now dud, which means they only provide a very little amount of interest, ~3% – 5% at max for a year. For example, even if you make an FD for 10,000 for a year, and withdraw the money later it would add only 278 rupees on 10000. Till the early 2000s, the FD’s were making profits for the money but then the interest rates started to drop. Also, the interest money on FD is a taxable amount.
PRO TIP – Start early, keep a long time horizon, and do not withdraw your principal amount or interest till your investment goals are achieved.
Cons of bank deposits
The question arises Should you still be investing in Fixed Deposits? For a better answer look forward to the drawbacks of Fixed deposits.
Income is fully Taxable
While investing, one should always look at the post-tax return and not the gross returns being offered. The investments in subjected to the normal rate of tax as per individual tax slab which deduces the overall return. Individuals in the 20% to 30% tax slab should reconsider their fixed deposit investment, with this the government becomes your partner in profit. Through proper tax planning, you can save a huge amount of income tax which can be utilized for your future goals.
Liquidity has its cost
Undoubtedly, fixed deposits are liquid and can be broken whenever you need money. However, liquidity in fixed deposits comes with a cost. If broken prematurely, you will not get the same rate of interest mentioned in the deposit certificate and will end up getting a lower rate of interest.
Returns can’t beat inflation
Generally, inflation rates run parallel to tax rates. It has been proven that in long run the amount from fixed deposit post-tax cannot beat inflation. And if your investments cannot beat inflation, then long-term plans like children’s education and your retirement plan are likely to be affected. If you want to beat inflation by a good margin then you need to take calculated risks.
Banks only insure 1 lakh rupees
This is one fact that everybody should be aware of that only Rs 1 lakh is insured with banks and this limit has not been revised for long. I am not saying that the banks are unsafe but the high accountability of non-performing assets NPAs is a cause of concern. You must be wondering what is NPA, these are bad debts in business that are unlikely to be recovered.
While it is important to have debt in your overall investment portfolio, it should not exceed the limit of a certain percentage of total assets. So are there any better options than bank fixed deposits with extra risks involved, the answer is yes? Public provident funds(PPF), Sukanya Samriddhi Scheme, and tax-free bonds are good long-term options.
Arbitrage funds are another good option for a period of one-year plus. The main reason why these funds are not popular is that they are market-related and returns are not guaranteed like fixed deposits and postal schemes. With the times changing one should also change their investment patterns. For years now, we have allowed banks to generate profit from our money and the government to become our partner in profit.
Best profitable Options to invest in with the money sitting in banks
The allure of Real estate is strong. In times when banks and stocks are inducing anxiety and worry about the money, real estate can be a savior. From numerous options available in real estate, one can become a landlord. Invest some principal amount on a property, fix it a bit, and rent it to the tenants to pay off the mortgage. If done right, real estate can be a huge financial upside. If any individual has more experience in the real estate business, they can also try the short-term opportunity of flipping houses. But in the short term real estate can also be an unreliable investment.
House flipping is all about buying a property put on for sale, getting it renovated, and then selling it to only make a profit. Generally, house flippers sell the house at a cost that will cover the expenses of renovation and housework and generate a handsome amount of profit to compensate for the amount of time invested in the deal. the profit amount also depends upon two factors- how well renovated the property is and what location it is situated in.
2. Investment in Precious metal
Let’s just consider the worst-day scenario of a market crash, the central banks have to flood the market with liquidity, precious metals like silver, gold, platinum, and copper will continue to retain their value, if not upraised. Precious metals correlate inversely proportional to other assets like shares, stocks, and bonds. this means when the value of the assets starts to go south, metals are unlikely to follow and may even increase in value.
Silver can yield far better profit than any other precious metal in the market than gold. Alike silver, gold has always been in demand, and over the years the demand will not go down but only increase. But, you can be sure that the demand for gold would keep on increasing, and hence the price would remain sky-rocketing giving good profit to investors.
3. Cryptocurrency and bitcoin trading
Cryptocurrency is the newest and technology-based investment. There are a lot of choices to make in this, but Bitcoin is just best known. Bitcoin exchange sites also provide platforms for customers to store their bitcoins. It is also a High reward high-risk opportunity, but you should not invest much or any funds in crypto that you depend on for the future. A bitcoin exchange and trading companies are rewarding but you have to deal with thunder competitions.
Cryptocurrencies have been popularizing with time. it was first introduced in 2009 and later being an internet currency became unpopular, also due to less knowledge about it. Crypto hit its rock bottom when in 2018 bitcoin lost its three-quarter value. Many financial analysts believe that these alternate currencies are here to stay and the brave investor might want to take the risk of hitting into crypto to make a big win.
The richest man Elon musk of Tesla had been a major player of cryptocurrency and has been doing rounds about his various activities which involve cryptocurrency exchange. Elon Musk had also announced selling Tesla cars with the payment method of cryptocurrency making him one of the very few people to start trading in technical money.
4. Stock marketing
Stocks, also known as equities are fractional ownership in a company, and a stock market is a place where investors can buy and sell these investible assets. The stock market has two purposes to resolve, where the primary focus is to assimilate funds for the company and expand the business. If a company issues 10 lakh shares of the stock and it initially sells it’s for supposing 100 rupees per stock, that would provide a capital of 10 crores that can be used to expand the business. By selling stocks the company generates funding needed for expansion and saves from incurring debt and paying interest on that debt.
The other purpose of stock investment is to give investors(who had purchased the stocks) an opportunity of sharing the profit of the public-traded companies. The other way investors can profit from buying stocks is by selling their stock for a profit if the stock price increases from their purchase price.
One such lucrative option is to invest in Oil stock, although, buying oil stocks in recent times is becoming riskier due to the global price fall of oil. Even after the rapid fall in prices of oil, the stocks remain a great investment to make because they can bounce back like it always had in past. The best time to invest in oil stocks is when the prices of oil are on global fall.
Public Provident Fund (PPF)
PPF is a popular investment scheme amongst the investor’s reasons being its multiple investor-friendly schemes and other associated benefits. It is a long-term investment for the ones who want to earn high but stable returns. With the PPF scheme, a PPF account is scheduled for applicants where the principal amount is deposited and the interest is compounded every month.
Funds invested in PPF accounts are not market-linked, hence, this scheme is ideal for individuals who have a low-risk appetite. At times when the businesses are down swigged PPF accounts can provide stable returns by investing annually. The interest payable is decided by the central government and it aims to provide higher interests than any commercial bank of the country. Currently, the interest rates stand at 7.1% and are subject to quarterly updates.
PPF account is a tax benefited investment, with the maximum principal amount of 1.5 lakh annually, the tax exemptions are applicable on the principal amount. Even the total interest incurred in PPF investment is also exempted from tax. Therefore, the entire amount is exempted from tax when redeemed on completion of maturity and this makes PPF a good and attractive scheme for investors in India.
Mutual funds are an investment vehicle where investors pool their money and then this pooled money is invested by fund managers across various investment categories like equity, bonds, shares, stocks, gold, and other revenue-generating assets. Later, the revenue generated from these investments is divided amongst all investors based on their share proportion. These investments are made for short-term, mid-term and long-term and the kind of investment made determines the risk factor of the funds.
The benefit of a mutual fund is that an investor can decide to directly sell their share to the public just like all the other companies listed on the stock exchange. There are two categories of mutual funds which are further divided into subcategories.
- open-end funds: These allow investment at any point in time and offer liquidity to the investors to sell and buy units at any given point.
- Close-ended funds: They remain open for a limited period in time and once the scheme is closed fresh investments cannot be made. For liquidity, these units are listed on the stock exchange and investors can trade them.
The Bottom Line
The above-mentioned schemes and investment processes are not best recommended as they are highly subjected to various market movements. But it’s your money and you have to make a smart choice of investing it in either market-linked instruments or the ones which remain unaffected by the movement of the market. Market-linked investments may yield higher returns but may also result in total capital loss, and is a work for Braveheart but the people looking for stability and assurance of the safety of their money have always marked the govt. owned banks as a safer option.
Edited and published by Ashlyn