Investments are the key to a financially secure future and even the present. For this reason, people are always looking out for investment opportunities that could help them multiply their income. However, it is important to take an informed decision while making investment decisions. Here are four things that you must always remember about income investing.
Fixed deposits aren’t out of trend yet
They would probably never be. A fd brings you the best of both worlds. It gives you the security of low-risk investments while providing lucrative returns. It is thus imperative that you assign some proportion of your funds to these deposits; even if you are the type of investor that has an affinity for riskier options.
But don’t just invest in any fixed deposit. There are a host of options available, and you would do well to compare the returns each one would pay using the online Fixed Deposit Interest Calculator. NBFCs Fixed Deposit, in fact, offers a high interest-rate, especially for senior citizens.
Evaluate your risks against your expected returns
Evaluating your risks against the expected returns on investment is one of the first things you need to do before you put in your hard earned money in any plan/scheme. Risk and return are the best pals. They walk hand in hand. Higher expected yield is usually accompanied by a greater risk and vice versa. The investment decision should ideally be made only when the expected returns outweigh or at least match the associated risks.
It is also worth mentioning that investments that offer an opportunity of making capital gains (property, equity, etc.) offer you low returns on income. You must also differentiate between your capital returns and income returns before you arrive at any conclusion.
Diversify your risks (please!)
Do not put all your eggs in one basket! The risk is just too much. A diversified portfolio not only helps you spread your risks across various instruments but also gives you the benefits of different types of investments.
Investing all your money in stocks may seem like a lucrative option, but that may change quickly if things go awry. Similarly, putting all your money in low-risk items such as government bonds might be a safe option, but the income generated from them is so minimal that it would not get you anywhere.
Taking a personal loan for investments isn’t always a bad idea
Yes, you read that right! Not all debt is bad. If you come across an investment opportunity, for example, a real estate property, which would potentially and most likely leave you with a stream of income or capital returns in the long-term and that would outweigh the cost of borrowing, then taking a personal loan for the same shouldn’t cause any harm. In fact, it presents you with an opportunity to improve your credit ratings. However, taking a loan for investing in the stock market is not a good idea.