It is said by Mr. Warren Buffet (Biggest Investor Today) – “Do not save what is left after spending, but spend what is left after saving”. He also quoted – “If you don’t find a way to make money while you sleep, you will work until you die”. And also if we have only one source of income then we will be dependent on that only. We can develop other sources of income through this single source of income by investing. In Fortune 500 List – Forbes List 30% people in the list are only investors. They do not run any business. They are purely investors. Money works for them and they just take care of where to invest their money. They don’t have their own business; they just invest in other’s business.
In the previous posts we have seen saving and inflation in a bit detail. Saving is usually made or saving happens only when some money is left after deducting expenditure from income. Usually we keep this savings in our vaults, drawer or purse. Housewives usually save money from the money kept for expenditure. Our Shopkeepers save money from the day to day business. Usually they keep this money with them in a separate vault. When the money is not needed immediately they transfer this saved money in Pigmy Account, Recurring Account, Saving Account and Fixed Deposits in their banks. They get some interest on these deposits made in banks and if this interest earned is more or huge than this interest received is also taxed according to income tax slab. If we want to invest this amount for a longer period we can also invest this amount in Government Securities. The amount invested in Government Securities is utilized by Government for the development of our country. As you know India is developing country so there is always requirement of funds. The interest incurred from these Government Securities is not taxable i.e. though you may be earning interest in Crore you will not be liable for any tax on the interest earned from these Government Securities. The interest rate of these Government Securities is less as compared to interest rate of banks on deposits. But as these bank deposits carry tax liability if they are huge, they yield the same returns as these Government Securities yield if we come under the higher income slab of income tax. The interest rate of these Government Securities or interest rate of Banks (after deducting Income tax) is less effective to fight with the inflation. We all think about and are in doubt about this that this interest rate on deposits will be eligible or capable of beating the inflation. We always bear conviction that inflation will swallow our interest earned and amount saved and deposited in bank in future.
When it comes to deposit with the banks; rising NPA’s of banks also afraid us to keep the deposits in banks and investors are spectacle about these saving deposits with the bank. Now a day it is often heard that rumors of insolvency of co-operative banks and mid size banks are in the money market. It is very difficult to keep our hard earned money into these banks with higher NPA’s and eroding credibility.
Some smart investors are aware of this & they know how these bank deposits are helpful in beating this inflation so they invest in endowment policies and mutual funds. They do so because they can earn more returns on their investments as these avenues have professionally skilled fund managers handling their money so that their returns can fight with inflation and their hard earned money is in the hands of professionally skilled money managers. In the coming post we will see the various avenues of investment and among these which one could be the best avenue in investment. If you like the posts please share the post to the needed one to help them prosper with knowledge and wisdom.