5 Ways To Grow Your Wealth Without Breaking The Bank
Growing your wealth is an ongoing goal and aspiration for many individuals. Success in building wealth demands considerable time, effort, and financial planning. It requires consistency, discipline and, most importantly, awareness.
Amid various tempting get-rich-quick schemes that surround us, it becomes imperative to exercise caution and discernment. Recognising the potential pitfalls of "too good to be true" money-making schemes is crucial. It is equally essential to avoid shortcuts and prioritise the path of long-term wealth creation.
This blog aims to delve into some comprehensive ways to grow your wealth. However, it is vital to remember that every financial journey is unique, and no one-size-fits-all formula exists for wealth accumulation.
5 Proven Ways To Grow Your Wealth
1. Save And Invest Consistently
Creating a surplus and saving wisely are the foremost steps in wealth creation. It involves managing your expenses and income efficiently. One of the easiest ways is to invest a percentage once you receive your income after building an emergency fund.
If you are not turning your savings into investments, you are losing your money to inflation. Adopt a well-thought-out, diversified investment strategy, be consistent, and stick to it.
2. Diversifying Through Non-Market Linked Investments
While market-linked investments like stocks and mutual funds may offer higher returns on your investments, they come with added volatility risk. Therefore, you must protect your investments by diversifying your portfolio with non-market-linked investment tools like bonds.
India is in the middle of an environment with a high interest rate. Deutsche Bank says the interest rate cycle has peaked in India1. This creates a favourable environment to invest in corporate bonds or NCDs (non-convertible debentures) owing to high yields. Investors can create investment strategies and rebalance accordingly.
However, higher yields should not be the only factor to consider while investing in bonds. Higher yields often come with higher risk. It is essential to perform due diligence, like checking the credit ratings and issuer strength and investing with a transparent and reliable online bond-providing platform.
Benefits Of Investing In Bonds
- Fixed Income: Investors get fixed returns in the form of interest over the bond's tenure. The principal is returned at maturity. At Grip Invest, corporate bonds give up to 13% pre-tax yield to maturity (YTM).
- Diversification: Diversification plays a vital role in investment strategies. Investing in fixed-income bonds can spread out the overall risk of the portfolio. Products like BondX, a securitised debt instrument offering diversification within bonds, can also be explored.
- Better Returns: Bonds offer potentially better risk-adjusted returns than fixed-income alternatives like fixed deposits.
3. Debt Management
Historically, using loans for consumption purposes was not widespread in India. However, over the last decade, there has been an increase in this trend. Several factors might contribute to this shift, including softening interest rates, growing focus on retail lending, and economic changes like growth, rising incomes, and changing consumer preferences.
It is important to note that while accessing credit can be beneficial for certain purposes, using loans for consumption without a clear repayment plan can lead to financial strain for individuals and contribute to broader economic challenges.
Debt management involves formulating a plan to repay debts efficiently. This is majorly done through budgeting and proper financial planning.
Effective Ways To Manage Your Debt
- Strict Budgeting: Track your income, expenses, and debts consistently. Cutting expenses and generating passive income is the key. Allocate a portion of your income for debt repayment before spending.
- Debt Consolidation: Combine and consolidate multiple debts into a loan at a lower interest rate. This will help reduce costs as well as simplify transactions.
- Opt For The Avalanche Or Snowball Method: The Avalanche method focuses on paying off debts with the highest interest rates first. The snowball method pays off debt according to size, starting with the lowest.
4. Generate Passive Income
In today’s time, it is challenging to generate sizable wealth from one source of income. To build wealth steadily, you should generate multiple revenue streams through passive income.
You can start smart investing and opt for high-yielding fixed-income options based on your risk tolerance and goals. You can also benefit from rental/leasing income. While traditional renting has pros and cons, you can explore fractional commercial real estate (CRE) and alternative investments like LeaseX to earn predictable, high-risk-adjusted returns.
5. Tax Optimisation
It refers to strategically and legally minimising tax liability. It helps investors retain their earnings and grow wealth.
Effective Ways To Minimise The Impact Of Taxes
- Invest In Tax-Saving Instruments: Explore investment options like the Public Provident Fund, Equity-Linked Savings Scheme, and National Pension System to benefit from tax deductions under Section 80C of the Income Tax Act, 1961.
- Utilise Deductions: Take advantage of available deductions on expenses like health insurance, education loans, home loans, etc.
- Select Salary Components Correctly: Structure your salary’s flexible components, like HRA and reimbursements, to reduce your taxable income.
Conclusion
To conclude, regular saving, smart investing, and thoughtful financial planning are proven ways to build wealth. It is fine to start small. The most important thing is to take that first step towards building wealth strategies. Explore Grip Invest to unlock a world of new-age investment options. With minimal investment requirements, Grip Invest makes these opportunities accessible at optimal ticket size, allowing you to build a diversified portfolio to grow wealth.
Frequently Asked Questions
1. Is it necessary to create an emergency fund in wealth management?
Yes! Creating a financial safety net to cushion unpredictable expenses is vital regardless of your financial goals.
2. Are there any fixed-income alternative investments other than corporate bonds?
Yes, you can explore a variety of securitised debt instruments on Grip Invest. These SEBI-regulated, rated, and listed instruments can give up to 16% IRR.
3. What do you understand by ‘yield to maturity’?
The estimated average rate of return on a bond if the bond is held until maturity is called ‘yield to maturity’.
References:
- Deutsche Bank <https://tinyurl.com/yk2cwjvd>
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This communication is prepared by Grip Broking Private Limited (bearing SEBI Registration No. INZ000312836 and NSE ID 90319) and/or its affiliate/ group company(ies) (together referred to as “Grip”) and the contents of this disclaimer are applicable to this document and any and all written or oral communication(s) made by Grip or its directors, employees, associates, representatives and agents. This communication does not constitute advice relating to investing or otherwise dealing in securities and is not an offer or solicitation for the purchase or sale of any securities. Grip does not guarantee or assure any return on investments and accepts no liability for consequences of any actions taken based on the information provided. For more details, please visit www.gripinvest.in
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