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Asset vs Income: Where Should You Invest?

  • Highlights

  • For income invest in instruments with regular payout

  • Decide on assets and invest for wealth accumulation

  • Hold assets like property for a few years for better return

  • Choose good quality assets to generate income

Different investments serve different objectives. While some will fetch you a regular income, the others are aligned for wealth creation and asset building. As an investor, it is important for you to first understand whether you want a regular income from your savings or want invest it into assets that will yield high earnings over time. Knowing the difference between the two will help you decide on the instruments to invest in.

Here are some options that you can choose from based on your financial goals.

For asset and wealth creation

Investing in financial devices for a longer tenor automatically turns your investment into an asset on maturity. And then when you further reinvest the matured amount, it becomes your accumulated wealth over a period of time. So, your asset strength includes everything from investment in long-term financial devices like property and gold, to shares and bonds. As an investor, you will gain wealth by buying or investing in these assets.

Unlike risk-free investments that are more capable of generating a fixed regular income based on their pre-determined interest value, these assets will give you a bigger return over a period of time which you can expect will grow based on the rising principles of the market.

Investing in physical assets like property will generate income for you in case you decide to put your land or house on rent. You can take an affordable home loan to finance the purchase of residential property and invest in its maintenance and renovation with an additional top-up loan offered by lenders at nominal interest. The appreciating value of the property you own will be valued as the wealth you have accumulated on your asset.

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Similarly, your investments in the equity market will fetch you yearly dividends on your shares, which can account for your usable income. Moreover, the growing price of the share you had bought at a lower price earlier will account for the wealth you have accumulated by holding on to these shares through varying market conditions. Alternatively, you can also buy gold and government bonds from banks or the stock market at their current market price and wait for the market price to rise over the years to turn your asset into a coveted wealth.

For regular income

Regular income on your investment can be generated through saving devices that give you access to frequent interest on your investment as regular payouts. Considering this situation, a non-cumulative fixed deposit is truly capable of generating guaranteed income for you based on the invested sum. For example, if you invest Rs.1 lakh for 3 years through a non-cumulative fixed deposit scheme, then the interest compounded at 7.85% annually will amount to Rs.23,550 on maturity. Instead of getting this amount all at once during maturity, you can choose to draw parts of the interest every month or every quarter as regular income.

Apart from the non-cumulative fixed deposits you can also plan on short-term fixed deposits with a locking period of a year. Alternatively invest in a recurring deposit by keeping aside a small portion of your income every month as savings for this account. These saving devices can be set up based on an immediate short-term goal. On maturity, they will help you fund your goals easily by giving you access to income that you have generated through your investment and interest acquired on the same.

Choosing investments that help you create wealth from assets is very important. Also, once you invest by choosing good quality assets, you can fetch income alongside and enjoy their appreciating value too.

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