Archives

Most of us will have an active income while our concept of a passive income seems distant.
It is a dream to reach a stage in life where you earn money by doing nothing. However, to reach this stage, one needs to have an active income. Money received from doing a physical work in the form of salary or profit from a business is active income.

Money earned without working is called passive income.

Passive income is earned in the form of rent, dividend, interest, and royalty.

If passive income is higher than monthly expenses, he or she is financially free.

Passive Income literally works and generate income when one sleeps. However, to generate passive income, one should have an income. At the same time, you should identify an option to invest so that passive income will be generated in the later phases of your life. This helps when nearing retirement age as active as well as passive income makes the retirement life quite safer.

However, one should always make a thorough study before identifying options that can generate passive income.

The following form passive income.

• Rentals from a company for an advertisement which has been pasted on your house’s exterior wall.
• Royalty from the sale of a book which you wrote and published
• Income from a YouTube channel which you had started and stayed committed to.
• Profit from a company which you funded

Doing a job creates active income.

If you invest this active income wisely, the returns from it will form a passive income, the rewards of which you will enjoy in your retirement years.

Before you embark your journey to be an investor, one should know the basic difference between saving and investing.

Though used interchangeably, both are different.

When you set aside money for future purchases or emergencies, you save it whereas investing refers to utilizing your saved money to deposit in FD’s, buy stocks and shares, properties with a much higher growth or return in mind.

Saving is the first step towards wealth creation whereas the purpose of investing is to generate income.

There are many ways in which you can save money.

Assume you are someone who frequents restaurants. You cut short this habit and save money so that you can plan a holiday or buy a new mobile.

In investing, you invest a specific amount in FD or use it to purchase stocks or shares with a long-term goal in mind.

Only if you have savings, you will be able to invest.

Difference between Savings and Investing

Savings

• No risk involved in savings
• No returns in savings as the amount saved remains same even after 10 years
• Savings is done for short term goals

Investments

• High risk involved in investing as equity investments depend on market growth
• High returns as FDs provide 6 to 7 percent interest and shares provide higher dividend
• Investments are done with long-term goals in mind.

To the question, which is more significant, both is the answer.

However, investment holds a higher significance and can be validated through an example of buying a shirt. The shirt was priced 1500rs 5 years ago but has increased to 3000rs due to inflation.  If you had saved 1500rs 5 years ago, the amount would have remained the same and proven insufficient to buy the shirt.

In case the amount was invested in FD, it would have grown into an amount sufficient enough to buy the shirt.

If you have kept aside a specific amount for short term purposes like paying your kid’s tuition fee next month, saving holds significance as hardly any time left to identify and invest the amount. But if the amount is for your kid’s higher studies next year, you can invest it in FD which provides you good returns.

Whether one should save or invest also depends upon the timespan one has at their disposal.

In short, whether to save or invest depends upon what you want to do with the money. Go through these and learn to understand your purpose with money.

 

Currently, there has been lot of buzz around investing in global markets. Moreover, there is no dearth of brokers who can help an Indian invest in multinational companies like Facebook, Microsoft, Google, and Twitter even while residing in India.

Opening an account with any of these brokers introduces you to the innumerable options available in global market.

However, most of the investors may not find it easy to do an analysis on international companies. But worry not for you have mutual funds !

 

Why Global Market

Exposure: Global market provides you with the chance of investing in multinational companies like Apple, Samsung, and Microsoft

Dollars: Investing in dollars is highly advantageous considering the appreciation in dollars compared to the Indian currency. While investing in a company in United states, you get benefitted from the growth of the company as well as the currency.

Huge Corpus: If you have a huge corpus amount in your hands, why limit your risks to Indian market. Diversifying geographically opens you to the vast options available there.

 

Tips for Investing

• Invest a 10 percent of your mutual funds in global market. For example, if you are investing Rs. 50,000 a month in mutual funds, invest 10 percent of it, that is, 5000 in global market.
• Avoid global market if the invested amount is smaller
• There are funds available which have 50-75% participation in Indian market and 25% in global market.
• Understand your investment objective, risk profile, terms of investment and the desired goal which helps you choose the funds.

Indians who make a huge presence in social media contribute a lot to the growing revenue of conglomerates like Facebook, Google and Twitter.

Why not then invest in these companies and increase your wealth ?