Invest in Credit Risk Mutual Fund or not?

With money matters, we sometimes get lost or wonder if we are on the right track. At times like these it would be nice if we could have some guiding principles that help us stay on path.

Here are three points you must always keep in mind and follow throughout your life:

1. Stay away from quick money-making schemes

“Do din main paisa double” Such lines are good to hear in Bollywood comedy movies but in real life they are nothing but tragedy. Wealth creation happens over a period of time. It is gradually accumulated over years with disciplined investing. Anything that sounds too good to be true is best stayed away from. In order to make a quick buck, we might end up losing our hard earned money and actually end up moving backwards in life. Systematic and disciplined investment on the other hand will gradually lead us to a path that continuously creates wealth for us. Remember, the right way to make money is to believe in one and only one scheme – compounding.

2. Save first, spend later

Your income source is usually divided in two categories- one that you earn in exchange of your time and the other that you earn by virtue of your money making more money i.e. return on investment. On the other hand your expenses are divided in two categories namely- spends and the outgoing towards your investments. What you save is eventually what will create further wealth for you. In order to save, you will have to ensure that your income is more than your expenses. The ideal way to go about saving is to first keep aside a chunk towards your savings and use the balance towards your expenses. Unfortunately, more of us first spend and save whatever little is left after that. This requires a disciplined approach but creates a lot of value in the long run.

3. Put your money to work

“If you don’t find a way to make money while you sleep, you will work until you die” – Warren Buffet. This simply means make your money work for you. Did you know by keeping money idle in a savings bank account actually devalues the money. Invest in products, returns of which beat inflation. The magic of compounding will work its way out and deliver to you results that could allow you to retire. Otherwise, as the quote says, if your surplus money is not beating inflation, you will have to work till you die to be able to sustain yourself.

These three principles, if followed to the T, will ensure you are always garnering wealth, even at times when you are actively not earning. If abided by, these pointers will always help you stay on the track on your journey towards wealth creation.

(The writer is  co-founder and CEO, Moneyfront. Views expressed are personal)