Looking at today’s increasing inflation, today everyone is thinking about ways to earn some extra income to meet their daily needs or you can say that most people are looking for ways to make money from money.
The rich people in our society are not rich just because they earn more money or run very profitably business, they are rich because they have the knowledge and the skill to make their money work for them. They have learnt the art of making money from money.
Most of us must have observed that rich families becoming richer. This is because from a very early age they give the children’s knowledge of financial education.
Middle Class: As per a report by the State Bank of India, the middle class in India comprises around 44% of the population. This definition includes those with annual household incomes between Rs. 5 lakhs to Rs. 25 lakhs
Upper Middle Class: There is no standard definition for the upper middle class in India, but it is typically considered to be a subset of the overall middle class with higher incomes and a more comfortable lifestyle. Based on estimates from various sources, it’s possible that the upper middle class in India comprises around 10-15% of the population.
Upper Class: The upper class in India typically consists of the wealthiest individuals who hold significant economic and political power. There is no specific threshold for defining the upper class in India, as it can vary greatly based on factors such as location, cost of living, and economic conditions. However, according to a report by the Credit Suisse Research Institute, as of 2021, the top 1% of Indians holds around 42% of the country’s total wealth, indicating a significant concentration of wealth in the hands of a few individuals.
So lets understand what are the things that rich people teach their kids about financial education or making money- That the poor and middle class don’t!!!
1. Stock Market
2. Mutual funds
3. Government bonds
4. Fixed deposits (FD)
5. Investing in real estate
6. Investing in gold
7. Insurance plans
8. National Pension System (NPS)
9. Public Provident Fund (PPF)
10. Post Office Monthly Income Scheme (POMIS)
Stock Market
What is Stock market?
The stock market refers to the collection of exchanges where publicly held companies’ stocks and other securities are bought and sold by investors. In simple terms, it is a marketplace where individuals and institutions can trade stocks of companies, such as shares, bonds, and derivatives.
The two major stock exchanges in India are the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE).
The stock market provides a platform for companies to raise capital by issuing stocks to the public, and investors to invest in these stocks and benefit from their growth and dividends.
The prices of stocks are determined by the forces of supply and demand in the market, and they fluctuate based on various factors such as company performance, economic conditions, and global events.
The stock market plays a crucial role in the economy as it helps in the allocation of capital and investment, which ultimately contributes to economic growth. It is also an indicator of the overall health of the economy, as a robust stock market often signifies a thriving economy.
How and where can you invest in stock market?
There are different options in the stock market that investors can choose from for invensting. Some of which are as follows:
1) Stocks:
Stocks, also known as shares or equities, represent ownership in a company. When a company decides to go public, it issues shares of stock to the public, allowing people to buy a piece of the company. Each share of stock represents a small piece of ownership in the company and entitles the shareholder to a portion of the company’s profits, as well as the right to vote on important corporate decisions.
When you buy a stock, you become a shareholder in the company, and your investment value will rise or fall based on the performance of the company. If the company performs well and earns profits, the value of your stock will likely increase, and you may receive a portion of those profits in the form of dividends. If the company performs poorly, the value of your stock may decrease, and you may not receive any dividends.
2) Mutual Funds:
What is mutual funds?
Mutual funds are investment vehicles that pool money from multiple investors to invest in a diversified portfolio of stocks, bonds, or other securities. A professional fund manager manages the fund’s investments and makes decisions on behalf of the investors, based on the fund’s investment objective.
When you invest in a mutual fund, you purchase units of the fund, and the value of your investment is determined by the fund’s net asset value (NAV). The NAV represents the total value of the fund’s assets minus its liabilities, divided by the number of units outstanding.
Mutual funds provide several benefits to investors, including diversification, professional management, and convenience. Since mutual funds invest in a diversified portfolio of securities, they can provide investors with a level of risk reduction compared to investing in individual securities. Additionally, mutual funds are managed by professional fund managers who have expertise in investment research and analysis.
There are different types of mutual funds available, including
a) equity funds = Equity funds invest primarily in stocks
b) debt funds = debt funds invest in fixed-income securities
c) hybrid funds = hybrid funds invest in a mix of stocks and bonds
d) sector funds = sector funds invest in a specific sector or industry.
Investing in mutual funds carries a certain level of risk, and it’s important to choose a mutual fund that aligns with your investment objectives and risk tolerance. Investors should conduct proper research and seek professional advice before making any investment decisions.
3) Bonds:
What are bonds?
A financial instrument or asset known as a bond is a loan that an investor makes to a borrower, typically a business or governmental organisation. In essence, when an investor purchases a bond, they are making a fixed- or variable-interest loan to the borrower for the duration of the bond.
Bonds frequently have a fixed maturity date, or the day on which the borrower must pay the investor the bond’s principal. According to the bond’s provisions, the bond issuer is required to regularly pay interest to the investor until the maturity date.
Bonds typically offer lesser potential returns than stocks but are often thought of as relatively low-risk investments.
4) Exchange-Traded Funds (ETFs):
Exchange-Traded Funds (ETFs) are investment funds that are traded on stock exchanges, similar to individual stocks. ETFs are designed to track the performance of an underlying index, such as the S&P 500 or the Nifty 50, and provide investors with exposure to a diversified portfolio of securities.
ETFs are similar to mutual funds in that they invest in a diversified portfolio of securities, but they differ in their trading structure. ETFs trade on stock exchanges throughout the day, like individual stocks, and their prices fluctuate based on supply and demand. Mutual funds, on the other hand, are priced once a day after the markets close and are traded through the mutual fund company.
ETFs provide several benefits to investors, including low cost, flexibility, and diversification. ETFs typically have lower expense ratios than mutual funds, making them an attractive investment option for cost-conscious investors. ETFs are also highly liquid and can be bought and sold throughout the trading day, providing investors with flexibility in their investment decisions. Finally, ETFs invest in a diversified portfolio of securities, providing investors with risk reduction compared to investing in individual securities.
There are different types of ETFs available, including equity ETFs, fixed-income ETFs, commodity ETFs, and currency ETFs. Equity ETFs invest in a diversified portfolio of stocks, fixed-income ETFs invest in a diversified portfolio of bonds, commodity ETFs invest in physical commodities like gold and oil, and currency ETFs invest in a specific currency or basket of currencies.
Investing in ETFs carries a certain level of risk, and it’s important to choose an ETF that aligns with your investment objectives and risk tolerance. Investors should conduct proper research and seek professional advice before making any investment decisions.
5) Options:
Options are a type of financial derivative that gives the holder the right, but not the obligation, to buy or sell an underlying asset at a predetermined price (known as the strike price) on or before a specific date. The underlying asset can be a stock, a bond, a commodity, or even a currency.
There are two types of options: call options and put options. A call option gives the holder the right to buy the underlying asset at the strike price, while a put option gives the holder the right to sell the underlying asset at the strike price.
The buyer of an option pays a premium to the seller (also known as the writer) of the option for the right to buy or sell the underlying asset. The seller, in turn, takes on the obligation to buy or sell the underlying asset if the option holder decides to exercise their option.
6) Futures:
With the help of futures, traders can purchase or sell an underlying asset at a predefined price at a given future date. Futures are a sort of financial derivative. The underlying asset may be a currency, stock index, commodity, or some other type of financial asset.
Futures contracts are traded on exchanges, and the dynamics of supply and demand in the market decide the price of a futures contract. The seller of a futures contract is required to provide the underlying asset, while the buyer of a futures contract is required to take delivery of the underlying item at the designated future date.
Futures contracts can be used to hedge against price variations, speculate on an asset’s future price movements, or fix a price for a transaction that will take place in the future.
Futures trading can be quite leveraged, allowing investors to control a sizable portion of the underlying asset with only a small initial investment. However, there are considerable dangers associated with futures trading, such as market volatility and the chance that losses could be greater than the initial investment. Futures trading thus necessitates a thorough knowledge of the underlying assets and the relevant market dynamics.
7) Commodities:
Raw materials or basic agricultural products are referred to as commodities and are exchanged on commodity exchanges. Metals such as gold, silver, and copper, energy items such as crude oil and natural gas, agricultural products such as wheat, corn, and soybeans, and livestock such as cattle and hogs are a few examples of commodities.
The standardization of goods’ quality and quantity makes them convertible with other commodities of the same kind. It is simple to trade on a commodities exchange because, for instance, a barrel of crude oil from one producer is practically identical to a barrel of crude oil from another producer.
Numerous variables, such as supply and demand dynamics, geopolitical developments, weather patterns, and general economic trends all have an impact on commodity pricing.
Exchange-traded funds (ETFs), futures markets, and physical exchanges are just a few of the ways that commodities are exchanged. Understanding the underlying market dynamics and the variables that can affect commodity prices is essential for successful commodity trading.
Depending on their investment objectives, risk tolerance, and time horizon, investors may decide to invest in one or a mix of these choices. Before making an investment in the stock market, careful research and expert guidance are essential.
You need a Demat Account in order to invest money in the stock market. There are numerous mobile applications available for opening demat accounts. include some of the following
1) Upstox Trading App
2) Zerodha
3) Groww
4) 5 Paisa
5) Angel One
Fixed Deposits (FD)
What is fixed deposit?
A form of financial instrument known as a fixed deposit (FD) is one that banks and other financial organisations offer. It enables people to deposit money for a certain length of time, often from a few months to many years. The bank provides a fixed rate of interest on the deposit for the duration of the deposit in return for the money.
FDs are considered to be a safe and low-risk investment option, as they offer a guaranteed return and are insured by the Deposit Insurance and Credit Guarantee Corporation (DICGC) up to a certain limit. The interest rate on an FD is generally higher than the rate offered on a regular savings account, but the rate may vary depending on the amount deposited, the duration of the deposit, and prevailing market conditions.
For people looking for a low-risk investment option and who are willing to lock in their money for a set length of time, FDs are a popular alternative. However, because there could be fees associated with withdrawing money before the maturity date, FDs are typically not a smart alternative for people who need liquidity or money in a hurry.
The interest earned on FDs is taxable in India in accordance with the applicable income tax regulations, and FDs can be opened in both Indian Rupees (INR) and foreign currencies.
Investing in real estate
The house rental industry can be an excellent option for you to make money if you’re looking for a means to make money with your money. You need a lot of money and some house properties in order to run a house rent business.
As you are all aware, people today either commute to job or school elsewhere, necessitating the necessity for a residence or room. If you have a large, beautiful property with more rooms or if you own additional land or a house somewhere, you can easily make a substantial income each month.
Nowadays, renting out a house is a relatively simple process. You simply need to list your homes on websites that specialise in online rentals, such as 99acres.com, magicbricks.com, and makaan.com. Additionally, by selling your homes with a major house renting firm like OYO, you may easily earn 1 lakh to 5 lakh per month if your home is in excellent condition.
As a result of the fact that you can make a lot of profit by renting out a room in your house that is already built, the house rent business is one that is simple to start and requires little capital.
The location of your home will determine how much money you can make from renting out houses. You can make a lot of money if your home is in a city or if your property is close to a college or school.
Real estate can be purchased in a variety of ways, including:
1) Direct ownership is buying a property outright and either taking care of day-to-day operations yourself or employing a property manager.
2) REITs: A REIT is a business that owns and manages assets that generate revenue from real estate. Since REITs are listed publicly, investors can purchase shares in a diverse portfolio of properties.
3) Mutual funds that invest in real estate companies, such as home builders, developers, and property management firms, are known as real estate mutual funds.
4) Real estate crowdfunding: Using an online platform, a group of investors invest in a real estate project.
When making an investment in real estate, it is crucial to do your homework, weigh the benefits and risks, and have a clear investment plan. Before making any investment decisions, it is also advised to get professional guidance from a financial advisor or real estate specialist.
Investing in gold
I’m sure you’ve heard of gold, but did you realise that you may profit from investing in gold? Indians frequently favour wearing or storing gold. Wearing gold jewellery to show off or viewing it as an investment option. Physical gold, gold mutual funds, gold exchange-traded funds (ETFs), digital gold, and sovereign gold bonds are the 5 ways to invest in gold.
1) Gold jewellery, gold bars, or gold coins are all examples of physical gold. In India, purchasing actual gold is fairly common. It is regarded by many as the simplest and most practical way to invest in gold. But 3% GST is added to the price of buying real gold. Purchase only BIS-hallmarked gold jewellery if you want to invest in gold through gold jewellery. It verifies the gold’s purity.
2) Gold ETFs are another investment option, however they are not very well-known in India. Your money is invested in genuine gold through a gold exchange traded fund (ETF), which fluctuates based on gold’s price.There is no maximum amount that can be invested; the minimum amount of gold that can be invested is 1 gram. The Gold ETF has no lock-in period.
3) Stocks of firms engaged in gold mining and exploration are referred to as gold mining stocks. The gold market can be accessed through investments in gold mining equities, but doing so has the same dangers as stock market investing.
4) Financial derivatives called gold futures and options let investors buy or sell gold at a certain price and time in the future. Investors utilize futures and options contracts, which are traded on commodities exchanges, to hedging against price changes or to speculate on the price of gold.
It’s crucial to think about the potential risks and rewards, as well as the financial objectives and time horizon, when making a gold investment. Before making any investment decisions, it is also advised to get professional guidance from a financial advisor or investment specialist.
Investing in Insurance plans
Everyone in this day and age is making money, but nobody considers how to double that money. We all understand the advantages of insurance, therefore you may use it in this case to your advantage by purchasing insurance coverage.
You can make a good quantity of money at a specific period by investing your money in insurance policies. You receive between 4% and 8% interest when you purchase any insurance coverage.
You can choose any insurance plan based on your needs after viewing a variety of insurance plans. The benefit of purchasing insurance is that, in the event that you are involved in an accident for any reason, your family will receive the entire interest amount in addition to the money you invested, as well as you and your family, in full. You must spend some of your money on insurance in order to be secure inside of it.
There are several types of insurance plans available, including:
1) Health insurance: This covers a range of medical costs, including those related to hospitalization, surgery, and prescription medication.
2) Life insurance: This offers financial help to the policyholder’s beneficiaries in the event of their demise.
3) Auto insurance: This offers protection for losses or injuries resulting from a collision involving a vehicle.
4) A home’s contents and liability are covered by homeowners insurance, which also offers coverage for damage to the building itself.
5) Disability insurance: If the insured gets disabled and is unable to work, this will replace their income.
6) Travel insurance: This offers protection against unanticipated occurrences such as trip cancellation, illness, and lost or stolen luggage.
It is crucial to thoroughly analyse the coverage, rates, deductibles, and exclusions of the policy while selecting an insurance plan. In order to fully comprehend the terms and conditions of the policy, it is also advised to compare plans from several providers and read the fine print attentively. Finally, it’s critical to pick an insurance provider with a solid history of honouring claims and offering helpful customer service.
National Pension System (NPS)
If you are doing a job and you want to keep getting regular income even after retirement, then retirement planning is very important for this. You can secure your future by investing in different places.
In terms of retirement planning, National Pension Scheme (NPS) is an excellent investment choice. The government-run National Pension Scheme (NPS) is a contributory pension programme. A long-term investment strategy is the National Pension System (NPS). A significant retirement fund is only available once on investing in NPS, and a monthly pension is also possible based on the size and performance of your annuity.
In accordance with the NPS, individuals may open an account with a Pension Fund Manager (PFM) who is registered with the PFRDA and make contributions to their retirement savings. Depending on the subscriber’s choice of investment option, the contributions are invested in a variety of asset classes, including equities, corporate bonds, and government securities.
Two different investing opportunities are provided by the NPS:
1) Active Choice: With this option, the subscriber has the ability to decide how their funds will be distributed across the various asset classes.
2) Auto Choice: In this option, the subscriber’s age determines how much money is allocated automatically. As a subscriber gets older, the asset allocation swings from stock to debt instruments.
The NPS also provides subscribers with tax advantages. Under Section 80CCD of the Income Tax Act, contributions paid by individuals to the NPS are deductible up to a maximum of 10% of the individual’s gross income (for self-employed individuals) or pay (for salaried individuals). Additionally, retirement fund withdrawals of up to 40% of the corpus are tax-free.
When they retire, subscribers can take up to 60% of their corpus as a lump sum, with the remaining 40% going towards an annuity from an insurance company that is registered with the PFRDA. The subscriber receives a consistent income stream from the annuity for the rest of their lives.
All Indian citizens, including those employed in the public, private, and unorganised sectors, are eligible to participate in the NPS. Also eligible are people of Indian origin (PIO) and non-resident Indians (NRIs).
Public Provident Fund (PPF)
The Indian government created the Public Provident Fund (PPF) savings programme to encourage long-term investing among individuals. It is a well-liked investment choice for people who desire to get returns on their investments without paying taxes.
Individuals can create accounts with any authorised bank or post office under the programme and contribute between Rs. 500 and Rs. 1.5 lakh per fiscal year. The 15-year lock-in period of the plan allows the account holder to withdraw the whole balance, including interest generated, tax-free, after that point.
The government determines the PPF interest rate, which as of April 2023 was 7.1% annually. At the conclusion of each fiscal year, the interest is credited to the account on a monthly basis.
Section 80C of the Income Tax Act, which permits people to claim a deduction of up to Rs. 1.5 lakh per financial year on the amount invested in the scheme, provides tax benefits for PPF. Additionally, both the amount withdrawn at maturity and the interest received are tax-free.
Indian citizens, including minors and HUFs (Hindu Undivided Families), are eligible to open PPF accounts. The account can be started with a minimum deposit of Rs. 100, and a financial year is allowed for a maximum of 12 deposits. After the 15-year term is up, the account may be renewed in blocks of five years.
PPF is, all things considered, a secure and dependable investment choice for people seeking to make long-term savings and tax-free profits.
Post Office Monthly Income Scheme (POMIS)
The Indian postal service provides a savings program called POMIS (Post Office Monthly Income Scheme). For people who desire to invest their funds to generate a consistent monthly income, it is a well-liked choice.
Individuals participating in the program may deposit as little as Rs. 1,000 and as much as Rs. 4.5 lakhs into a single account. Additionally, joint accounts with a 9 lakh rupee investment cap can be formed. The scheme has a 5-year maturity period, and as of April 2023, the government has set the interest rate at 6.6% annually.
You can open an account for this program in any branch of your local post office to benefit from it. additionally, one may enroll in the Post Office Monthly Income Scheme.
Monthly distributions of interest are made and are immediately applied to the investor’s savings account. For people searching for a consistent source of income, the monthly interest payment may be a desirable aspect.
One disadvantage of POMIS is that there is no tax deductible for the investment and that the interest earned is taxable. Investors may, however, be eligible for tax benefits under Section 80TTB of the Income Tax Act, which permits senior individuals (over 60 years of age) to deduct up to Rs. 50,000 from interest earned on deposits made with banks and post offices.
In conclusion, POMIS is a suitable investment choice for people searching for a consistent stream of income from their assets, particularly senior citizens. There are no tax advantages associated with the investment, and it is crucial to remember that any interest produced is taxable.
In today’s post, I have given you complete information on different ways to earn money from money. I sincerely hope you enjoyed our latest post.