Have Rs 500? Here's how to get rich

How many times have you said to yourself, "I am not investing now because I don't have enough money?"
Well, even if your answer is 'once', you are only fooling yourself.
If you are waiting to amass your savings to invest, you are wasting your time. That, seldom happens. Before it gets too late, start investing today. And you don't need a fortune to do that. You can start with a mere investment of just Rs 500 per month. The amount is of little significance, the regularity matters more.
After all, "People who create wealth are those, who invest on a regular basis and not occasionally," says Certified Financial Planner, Gaurav Mashruwala. The important question is where and how to invest?
According to investment advisor Sandeep Shanbhag, one can maintain discipline with a monthly investment pattern. "First, asset allocation between debt and equity needs to be determined as per the investor's risk profile and situation. Once this is determined, monthly investment in debt and or equity can be done."
As far as debt instruments are concerned, Public Provident Fund (PPF), bank fixed deposits, recurring deposits and post office schemes are good options. The minimum investment in PPF is Rs. 500 and it gives 8% tax-free return. In fact, it is a must in any investor's portfolio, big or small. The downside of PPF is that it has a long lock-in period of 6 years.

Talking about recurring deposits, Mashruwala says that although there is no risk of any loss, the liquidity is at cost. You may not be able to withdraw the savings for a certain period and if you do so, either you have to pay penalty or some amount would be deducted. Moreover, he cautions that the interest on these deposits is taxable. These deposits usually give an interest of anywhere between 6 per cent and 7 per cent depending on the term. So, a post tax return on these deposits can be quite low.
As against that, post office schemes like national savings certificates offer taxable returns of 8 per cent. "Investing in debt based mutual funds through SIP (Systematic Investment Planning), is also a good option," says Mashruwala. Systematic investing is especially valuable for the investor who wants to get his investments going, but doesn't have a large sum of money to invest. "Systematic investing works particularly well if you fear that you might buy a mutual fund at its peak, just before the stock market and your fund's shares head into a slump.
"It offers a disciplined way to invest a portion of your income at regular intervals without trying to second-guess the market, thereby also protecting you from extreme fluctuations in the market. And, its effect on your investment's growth over time can be nothing short of amazing. This concept is called rupee cost averaging. Read more

Tags: investing, PPF, portfolio, lock-in period, investers portfolio, SIP, debt funds, mutual funds, investment, post office schemes, NSC