We’re sure by now you must be curious about getting that extra buck over and above your regular monthly income.
Before we introduce you to some exciting ways of making an extra income, let us discuss a simple question.
Is your paycheck sufficient for your cost?
The answer is No.
It goes without saying that you work hard for your money, but your paycheck won’t cover all your necessities, as well as luxuries.
What is the solution to this?
How about having some additional income without much effort?
Sounds interesting, doesn’t it?
It is always desirable to have another income that tops-up your monthly income. Well, passive income is the solution to the cash flow mismatch.
Passive money will undoubtedly help you focus on things you desire to own in life, rather than just focusing on the three necessities – roti, kapda, and makaan.
In this article
How can you earn passive income?
Very simple, let your money work for itself even when you are asleep.
Is it possible?
Of course, it is possible!
The following approaches will let your money do much of the work
1.Renting a property
Traditionally considered as an honorable position, renting helps you generate extra cash.
If you own a property, think of renting the property.
If you do not have real estate ownership that is freehold and not occupied, consider buying one alone or with the help of few friends/relatives/colleagues and share the income generated by way of rental.
2. Go debt free
Debt is considered a maze.
A deadly one.
Having a debt results in paying interest. Thus, paying off debt could provide the most significant raise.Paying off debt isn’t technically earning, but it has a similar effect on your wallet as passive income would.
Now let us discuss the new-age ways of generating passive income.
3.Own dividend-paying stocks
When an equity investor buys a stock, he/she becomes a partial owner of the company.
By investing in a company that pays a regular dividend, you merely sit back and collect the cash rewards. Although, there is a degree of risk associated with your capital.
Are there other options?
Are you confused about whether you should invest in equity?You must definitely be worried about the risk that are involved.
But, we have another option for you.
Let professionals invest in securities on your behalf!
Yes, mutual funds is the answer.
Invest in mutual funds and let your money work for you, while you are asleep and add to your passive income.
In India, mutual funds are becoming increasingly popular and are now opted by a large section of investors who seek to gain from the capital market, but with caution.
It doesn’t matter what your requirement is, a regular income or wealth creation, mutual funds are your go to option.
All you need to do is choose a fund that matches your goal, investment horizon, and risk profile.
Let us see how.
You must opt for debt funds that bear a comparatively lower degree of risk.
Debt funds are ideal for a horizon less than five years to earn better post-tax returns
(remember, debt funds held for over three years qualify for longterm capital gains tax with an indexation benefit. Indexation helps bring down the rate of tax on returns. Thus, debt mutual funds are preferred over bank deposits.)
These are the funds you can invest in, based on your ideal investment duration:
- To park for an overnight purpose, use liquid funds
- To invest for a marginally more extended period, use ultra-short term schemes
- To park money for a few years, use short-term plans
You should opt for equity funds that make higher returns but come with comparatively higher risk.
But, within this category , you should choose funds based on your risk profile.
- Conservative investors must opt for balanced funds or large-cap funds
- Moderate risk – multi-cap schemes
- Aggressive investors – Opt for the mid-cap fund and small-cap funds.
Before investing, always ensure that you opt for the growth plan, so that every penny generated from capital gain is invested in providing you with compounding benefit.
Remember, compound interest is called the eighth wonder of the world as it adds sheen to the corpus over a long period.
To see the real benefit of compounding, hold the fund for as long as 10-15 years, and you will see the magic.
Lastly, remember to choose only direct plans as they spare you of the brokerage cost and provide higher returns as compared to the regular option.
Now that you have a clear idea about what kind of funds you should be investing in, based on your risk appetite and investment duration, remember to analyse the funds, before taking your final decision and review them periodically.
Should you need assistance, feel free to connect with us. You can drop us a mail to [email protected] or you can even contact us through our customer support number. Our team is always ready to help you!
Disclaimer: The views expressed in this post are that of the author and not those of Groww