The Secret Recipe to Create Wealth

We save money because the future is unpredictable and ‘savings’ act as a safety net against any emergency that may arise in the future, such as loss of employment. Savings ensures high liquidity and therefore makes you feel financially secure.

The hardest thing about Savings is just getting started, however, it is not a herculean task. The simple trick is, to begin with small, and start right now. Establish your goals, set your priorities, create a plan and finally convert your dreams into reality. Do not forget to record your expenses and make a workable budget in the process.

But, there is a twist……in case you want to become rich!

Savings alone won’t make you rich, so you should learn the art of saving via investing. People traditionally believe that whatever money is left with them after incurring all the expenses is saving. This definition is a conservative version of Savings and surely it won’t make you rich because Savings account in India can fetch you not more than 6% interest rate.

So, what is the secret recipe to become rich when Savings is your main ingredient? You will have to follow the aggressive version of saving money which is saving via investing!

What is investing?

When you buy an asset to generate returns over a period of time while you take care of any underlying risk, you are investing. Otherwise, it is a simple buying process. Buying a property worth lakhs and subsequently selling it for Crores is investing. Buying Milk for personal consumption is a simple sale transaction. In case you want to invest, make sure that your investment is able to beat the inflation rate with the widest possible margin. Example - Mutual funds.

How do we save via investing?

People generally believe that Investment can only begin with savings. However, LAKSHMISHREE’s financial experts are of the opinion that the reverse is true. According to LAKSHMISHREE’s experts, you can deduct a specific amount from your monthly salary on a date of your convenience. The same amount can be transferred to a Mutual Fund. This process is known as Systematic Investment Plan or (SIP).

SIP is a disciplined mode of investment which promotes savings. It also offers, investors, the benefit of rupee cost averaging and is loaded with lots of other benefits. Once you start investing, the power of compounding starts appreciating your infused capital, gradually multiplying it every single day.

Investing prudently on the advice of your advisor in mutual funds like ELSS will also help you save tax under Sec 80 C. Your Savings Account does not offer you any such benefit, it only deducts TDS in case your interest income exceeds Rs 10,000. You may argue that ELSS returns are also taxable, but ELSS returns and tax benefits far outweigh a common saving Account. (March is around the corner, so hurry up and contact LAKSHMISHREE for Mutual Fund investments if you want to save tax up to Rs. 1,50,000 under section 80C).

LAKSHMISHREE’s financial experts have a special piece of advice for conservative investors or for those who don’t want to wait for long. These investors can park your funds in Debt Funds. Some Debt Funds allow you to park your funds for a period as small as overnight! SIP is available for any kind of Mutual Funds.

Shyam Aggarwal is an IAS officer and he has been investing in Mutual Fund via SIP on our expert’s advice. Shyam Aggarwal had been investing Rs 1 Lakh per month via SIP in Mutual Funds from past 20 Years. He recently redeemed all his money last month and earned a profit of rupees 9 Crores!

Charandas is a farmer. His yearly earning is Rs. 5,00,000. He keeps all his earnings from Farming in a saving Account he started 20 years ago, which currently earns him only 3.5%. Charandas has been investing Rs. 1 Lakh in Bank FD annually for 20 Years. Last month he redeemed the entire amount from Bank’s Savings and FD account. The amount he received was a mere 31 Lakhs.

Shyam Aggarwal scored over Charandas in terms of ROI. Shyam’s prudent investment via SIP (Saving via investing) made him richer while Charandas could hardly appreciate his money. This is the benefit of saving via investing where the investor enjoys the power of compounding.

Savings via investments may demand a lot of patience and discipline, but in the end, it pays off and you start reaping high ROI, after a period of time.