How to Make Money From Investments?

Looking for ways to invest money to make money? Investing is always viewing as a source of income by many people but only some are actually able to actually make money. While there are some who still prefer to keep money in their bank saving accounts only and earn interest over it. 

Many people are of the view that keeping money in their bank savings account similar to investing. Indeed it helps them earning an interest rate but for a longer time period, the earnings fall short of overruling the impression of inflation.

So, it becomes very important to look out for investing money alternatives to aid in earning more money.

What are the Best Ways to Earn Money by Investing?

There are multiple alternatives there to make your money earn you money. Out of many, we have picked 8 methods you can opt-in for your investment journey.

List of Options or Instruments for Investing:

• Fixed Deposits (FD)

Fixed Deposit is a very common investment instrument offered by banking and non-banking financial companies. A bank fixed deposit is a very popular choice for investing due to its assured return and safety. Each FD depositor has insured up to a maximum of Rs 1 lakh as per the Deposit Insurance and Credit Guarantee Corporation (DICGC) rules. One can also opt for monthly, quarterly, semi-annually, annually, or cumulative interest option as per the need. An earned interest rate is then added to one’s income and then taxed as per the income tax slab rate. Presently, most of the banks offer interest rates in FD between 6.5% to 7.5% for tenure period ranging from 1 to 10 years.

• Fixed Deposit Sweep-in

Fixed deposit sweep in or 2-in-1 account or money multiplier – is a provision to the customers provided by lenders (Banks and Non-Banking Companies). In order to avail perks, depositors need to have a savings account linked to their fixed accounts. The depositor sets a specific threshold limit, when the balance in the saving accounts goes beyond the specified limit, the surplus amount is then transferred to the linked FD account. The transferred amount earns higher returns ( as per the current FD interest rates) than the normal savings account.

• Post Office Schemes

Public Provident Fund (PPF), Senior Citizens Savings Scheme, National Savings Certificates (NSC), Sukanya Samriddhi, etc are examples of small savings schemes which are also approved investment options among fixed-income investment. The government sets the rate of interest of small savings schemes based on the yield of the government securities, at the beginning of every quarter of the financial year. During the times of getting higher returns than bank deposits, one should link them to their investment option as they are long-term government products.

• Debt Mutual Fund Schemes

Investors may opt for debt mutual fund schemes for earning money and better tax-efficient returns as the profits entitled to avail indexations benefits after 3 years. Debt Mutual Fund Schemes do not invest in equities instead it uses investor’s money into securities generating fixed-interest sich as government securities, corporate bonds, commercial paper, treasury bills, and many others. Their returns vary from 7 percent to 12 percent as per the bond funds durations.

• Equity Mutual Fund Schemes

Equity mutual funds primarily invest in equities and equity-related instruments. As per SEBI rules and regulations, an equity fund schemes have to invest more than 65 percent of its total assets in the shares of different companies. Market return for large and mid-cap fund schemes is around 9 percent, 12 percent, and 15 percent for 1, 3, and 5 years.

• Investing in Gold

The gold returns can be too volatile for some time period and then goes flat for several years. Gold also comes in Jewelry form along with its own separate safety and high-cost concerns. Don’t forget to add the making charges of Jewellery which lies in the range cost between 6 percent – 14 percent of the gold’s cost (This cost can go high up to 25 percent in case of special jewelry designs). For those investors, who wants to get gold in coins can also buy ingeniously minted coins. An alternate approach of owning gold is through Gold ETF’s which is a more cost-effective approach. In Gold ETFs, all selling and buying take place on NSE or BSE (Stock Exchange) with gold as an underlying asset. Sovereign Gold Bonds investment is an approach of paper gold investments.

• Peer-to-Peer Lending

Just like e-commerce websites like Flipkart, OLX, and Amazon, etc, a peer-to-peer platform (P2P) is a marketplace for ventures like money lending. It is a more organized and structured way of lending money to others via the P2P platform. The P2P money lending platforms just like other instruments have the recovery process in place and it is advisable to understand the terms and conditions of the P2P lending platform carefully before using the P2P service for fulfilling money objectives. Since it is more of a kind of unsecured loan with zero interaction between the lender and the borrower, a P2P lender needs to be fully aware of all the risks associated with the platform. Currently, the interest rates earned ranging from 13 percent to 30 percent.

• Equity Shares

Stocks are the most common and highly encouraging form of investing. However, this is not the type of investment that many could benefit from. Only where we could actually see the benefit is by investing in the long term only. It basically means investing in stocks for 10 or more years.

Making money from investing in stocks is not a cup of tea for everyone due to its volatile nature with no guaranteed returns. Moreover, not only picking up the right stocks for investment is difficult, entry time and exit time valuation is also not a piece of cake. Yet if stocks been held for a long period of time, they are able to overcome inflation with higher returns in comparison to all other assets.

Similarly, the chances of losing a considerable portion of invested capital are also high until and unless one opts for a stop loss method. In the stop-loss method, investors can place an advance order of selling a stock at a certain price to curtail losses.

That’s how – “People retire becoming rich”.

What about investing in Equity for the short term?

As the name states, the short term generally means investing money by trading in and out of stocks over a short period of time and end up making money.

When it comes to short terms trading, there’s a chance that you make money but there’s always a luck factor involved along with lots of both technical and fundamental knowledge.

What’s Best to Choose?

For amateur with short-term investment intent can make money but it depends on your technical analysis knowledge and an element of luck too. As there you could easily lose more than you actually gain.

So instead of going for the short term try to always go for the long term, because in the end, you would be making money from both sources.

With long-term investing you could easily negate the risk of short terms investing such as drop-in prices etc.