3 fascinating ways to earn money in stock market

A few months back, my friend asked me to teach him about the stock market,

A few of my other friends were also curious to learn about investing in the stock market,

Guys were excited and opened their new brokerage account,

But the biggest problem was they were clueless, didn’t know how to proceed further, extremely confused about what stocks to pick, concerned about the time horizon (When to buy and sell),

Their rationale was to buy a stock that was near it’s 52-week low and wait for some time to bounce back to make decent profits.

This bothered me a lot because this is not the right way to make money in the stock market,

At the time, even I was not aware of the whole picture of how to earn money in stock market,

After exploring, I got to know about these different opportunities,

What is trading:

Anything you invest with an idea to exit is called trading,

Buying a stock and selling it in a short period, maybe within a day or weeks or months, is considered as trading,

Stock trading is an extremely lucrative avenue of earning income. Of course, it’s also very risky,

There are different ways you can make money through trading,

Normal Trade (BTST):

BTST means “Buy today Sell Tomorrow,” as you might have understood from the name itself,

This option of trade is quite apparent. You buy “xyz” stock and hope the price will increase in the future,

For example,

A few months back, we saw that the Reliance share price had dipped and reached somewhere around Rs.1000,

At the time, if you had thought it would increase in the future, you would have bought it at that price and sold it in the future and booked a profit.


By looking at the numbers, I’m hoping you got better clarity on how normal trading works.

Bottom line: A person looking for short term profits can consider this type of trading. Among other trading options, this is relatively less risky.

What is intraday trading:

In Intraday trading, you buy “xyz” stock and hope the price will increase within a day. Once you see the stock price rising within a few minutes or hours, sell and book a profit.

You can’t hold the stock more than a day. Buying and selling should happen on the same day.

Day trading is like playing T20 game; you don’t have much time to act.

The beauty of the product is, it comes with leverage.

Leverage means the act of using borrowed money to invest in the stock market.

See the pros and cons of leverage with an example,

what is intraday trading

If you observe the above example, you would notice the effect of leverage,

The stock price movement is just ±1%, but the profit/loss is leveraged to ±10%.

The upside is if it works in your direction, you get 10% profit in a day, which is insane, right,

At the same time, you should be aware of the downside. When it goes in the opposite direction, you will lose 10% in a day.

Bottom line: Risk is exceptionally high with rewarding returns.

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Option trading:

Last week, when I spoke with my friend, he asked me if there is a way to earn 2000rupees in a month with a capital of Rs.10,000 in the stock market.

This is the product I’d suggest which is option trading, it is one of the types of derivatives,

Derivatives is a contract signed between buyer and seller, where the price of a contract will be derived from the price of an underlying asset.

I know it sounds quite technical, but I hope you will get some idea with the following example,


Assume you have Rs.10,000 in hand,

Looking at Reliance share, which is trading at Rs.2000, you think it will increase to Rs.2,100 in a week or an in a month based on any announcements or for some other reasons,

You want to make money out of this opportunity,

Ideally, you can buy 5 shares now with Rs.10,000 and earn a decent profit. This is how regular trade works,

But option trade is designed in a way to earn significant profits in a very short period,

It is not as tricky as you think,

The above diagram is a reliance option contract (Just for the example)

Spot price is the current market price of reliance which is Rs.2,000.
Strike price is the target price, which we hope it will reach in a month, which is Rs.2,100.

Imagine for a moment a contract is signed between a buyer and a seller,

In this case, you are the buyer, hoping the stock price will increase. On the opposite side, someone who thinks stock price will go down who is the seller of the contract.

The premium of the contract is Rs.20. The lot size is 500units,

The price of the contract will be (Premium * Lot size) 20*500= Rs.10,000.

The buyer pays Rs.10,000 to the seller.

Remember one thing, the contract price will increase/decrease with respect to increase/decrease of reliance share price (underlying asset).

what is option trading

In scenario A, there is increase of Rs.2,000 in contract price with respect to Rs.100 increase in the share price.

In scenario B, there is decrease of Rs.2,000 in contract price with respect to Rs.100 decrease in the share price.

This is a simple example to understand how option trade works,

I’ve kept the information about the different ways of trading at a minimum so as to not overwhelm anyone.

Did you notice the difference between option trading, intraday trading, normal trading,

how to earn money in stock market


To start with trading, you have to work on the technical analysis part, where you get to explore different charts, patterns, moving average indicators, etc.

This is a game of skill, where you learn the basic rules of the game, practice it online using a virtual trading platform, then implement it, and enjoy the returns.

Happy Trading!!

Understand 3 investing basics to become successful investor

People around us have told you and me to study well, score good marks, get place in good company,

Once you got a job, they think you’re pretty good to carry on your life,

That’s fair, but have anyone spoke you about how to handle the money, grow the money, and make it work for you,

At the end of every month salary is credited in your account,

We would have got some free advice from parents to start saving somewhere, start RD, don’t keep the money in the hand itself, you may end up spending unnecessarily,

Personal money management is one of the important life skills which everyone needs to know,

Unfortunately, no schools and colleges have taught that,

In this post, you’ll get familiar with the most essential investing basics, which will lay the foundation for your investment journey.

investing basics

Main difference between saving and investing:

If you’re a depositor in a bank, you will go to the bank, will opt for a fixed deposit or recurring deposit,

Banks will offer you a fixed rate of return (X%) based on your investment horizon,

It may be (5-6%) yearly rate of return,

Then you sign the relevant documents, deposit the money, Job done.

For the time invested, you get the fixed return, which is pre-specified in the document.

This is saving which we all are very familiar,

But on the other hand, if you invest your money, it will grow exponentially over time.

What do I mean by Grow here?

Understand with this analogy,

I remember, before few years my parents have sown some seeds and planted small trees at the back of my house,

Now I can see quite a lot of trees and plants have grown taller, with a lot of leaves, flowers, and fruits in it,

At the same time, there is one small guava tree with significantly fewer leaves, and no fruits have grown in it,

This exactly applies in investing,

You will never know which plant or tree will grow well,

But based on some factors, you can understand how things might turn out,

Weather, proper sunlight, pest attacks, soil support, are few things need to be figured out before planting a tree,

Like that investing in the Stock market, mutual funds has it’s own risks, but understanding it before investing is very important in your investment journey,

The more you educate yourself, the less you get panic in the future,

Bottom line: Saving is like storing seeds in a box; investing is like sowing seeds in the ground.

The Power of compounding:

A few days back, I was going through the fixed deposit document of my parents,

At the time, my mother was quite concerned and told before few years money used to double quite earlier than now,

Banks used to offer higher rates somewhere around 9.5%,

Those days are gone…..

Today the same bank is offering is (5.5-6%) for a 5-year term deposit,

Do you want to know how long your invested amount will take to double without using a calculator or excel sheet,

How to double the money?

Heard of Rule 72?

Just divide 72 by the interest rate of what the bank is offering,

The answer tells you how many years it will take to double the money,

For example,

Scenario 1, Conservative mindset:

Assume bank offers 6% per annum,

You are depositing Rs.100,000 at the age of 25,

rule of 72 example

Just by doing simple math, we figured out it takes 12 years to get double the money of invested amount,

The calculation is straightforward, 72/6 = 12 years,

There will be a change in interest rates in the future,

This example is just for understanding purpose,

I’ll give you another scenario to make the picture more clear,

Scenario 2,  Less risk-averse mindset:

By looking at the long term statistic,

I’m assuming Equity Mutual fund, on average, generate 12% CAGR(compounded annual growth rate)

You are investing the same Rs.100,000 in equity mutual fund at the age of 25,

rule 72

Here the money is getting double every 6 years, whereas in scenario 1 (12 years), you have to wait 6 more years there to double,

Math is 72/12 (Which we assumed as return from equity Mutual fund)

Two key differences from scenario 1 and scenario 2 are,

In scenario 1 you get 8Lakhs at the age of 61, whereas in scenario 2 you get that same money much earlier at the age of 43 itself (18 years difference)

Time invested is the same in both scenarios, but see the difference in the growth of money  64Lakhs in scenario 2 and 8L in scenario 1. (56 Lakhs difference).

This is the Power of compounding!!

Bottom line: When you allow your money to grow by investing, you will reap great returns in the future for what you sow in the beginning.

the power of compounding
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Scenario 3, Cost for the initial delay:

In this scenario, you are investing the same Rs.100,000 in equity mutual funds, but at the age of 31,

Maybe you thought to delay it for some reasons,

how to double the money

Everything is the same as scenario 2 money gets doubled every 6 years,

Since you have initially delayed 6 years, you deserve to get less than what you got in scenario 2, right?

Don’t be shocked to know that,

The cost for delaying 6 years is 32 Lakhs, 

The delayed time may look less, but the magnitude is very high,

Compare for the respective years as well. You will end up getting only half the amount.

Since you waited for a few years, the effect of compounding has started late, which in turn reflects in returns.

Bottom Line: If you’re yet to start investing, better late than never, educate yourself, and step up the game as early as possible.

personal money management
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Goal-based investing:

This  is another crucial element which you need to figure out to kick-start your investment journey,

Imagine for a moment you’ve plan to do a master degree/specialization course in the future,

The next question would be what you are aiming for and how much will be the expenses for that,

Another essential thing to examine is within how many years will you be doing that,

Based on these expectations, time horizon, you’ve to set up an investment plan to achieve the goal,

This is just an example,

Different people have different plans,

Like buying a home, car, exotic vacation plans, marriage, family commitments, and the list goes on.

Make a plan accordingly,

I’m pretty sure if you have a decent fund in your hand, you can execute the plan smoothly in the future,

Bottom line: Investment should always be focused on goals which in turn makes you disciplined and patient in your investment journey.

goal based investing
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Once you’ve spent enough time on understanding what you want to achieve by investing,

To be honest, the half battle is won,

If you’re an early-stage investor, make your belief system updated with these investing basics,

Keep learning!!

Happy investing!!

Essential things to consider on “Why to invest in mutual funds?”

importance of financial literacy

Have you seen this ad before?

I came across this ad when I was watching CSK vs MI match,

Where Shreyas iyer would be concerned to know the performance of different mutual funds,

Knowing that his friend Rohit Sharma reveals there is a website called Mutualfundsshaihai.com where you can know the performance of all the mutual funds,

And puts the disclaimer Past performance won’t necessarily indicate Future Performance,

Ask yourself  “Why to invest in mutual Funds”?

It’s shouldn’t be like someone told they are doing it and getting great returns,

You also have to do the same,

This is money game, different people have different investing goals, different risk profile,

I’ve discussed different types of mutual funds with practical scenarios in this post.

So figure it out what suits your need,  

What is financial literacy and why is it important:

Let me tell you a story,

Years ago when I was a kid a gentleman used to come to my house,

He used to have a discussion with my parents and with my brother about insurance schemes, saving schemes, tax saving schemes and all.

Those days when I was a kid I’ve observed it but never bothered about it.

Years passed….Now I’ve become grown up a kid and I’ve started asking questions to my parents about their savings, investments and expenses.

With that I came to know, that gentleman has suggested to start investing in mutual funds as well.

Surprisingly, my parents have migrated from traditional investments to mutual fund.

Part of the FD and RD savings have been moved to SIP and lump sum investment in mutual fund,

SIP is like RD and lump sum is like FD, don’t worry if you’re new to these terms I’ve discussed in detail in the later part,

My parents are happy about their SIP, since it has given double digit return, they are doing it for the past 9 years, invested Rs.1000 per month and allowed it grow over the period of time.

But on the other side lump sum invested money is not doing great.

Before 4 months market value of invested amount was 30% down,

When my parents saw that in the monthly statement they were shocked, panicked and thought of redeeming it,

Somehow they convinced themselves that it will recover in a period of time,

Last month when they came to know the money got recovered to the invested value they were happy.

But their biggest concern was had they invested in FD they would have earned some return in 2 years,

Here comes the importance of financial literacy,

Mutual Fund is a whole different ball game when compared to FD, RD.

In FD, RD you deposit in the bank, stick to the guaranteed return, Job done.

For the last 3 decades my parents are used to that and suddenly when they are exposed to market fluctuations imagine how their behavior will be.

That gentleman who is a mutual fund distributor, he did a great job in recommending better ways to grow the money efficiently.

But he didn’t assess the risk profile of my parents, haven’t discussed about their goals for investing, time horizon and did not make them aware of different scenarios possible.

Financial literacy means it is a ability to understand and efficiently use of various financial skills such as personal finance management, budgeting and investing.

In this post, I’ve focused on investing on how to grow the hard-earned money through one of the efficient ways.

Why to invest in Mutual funds:

If you’re a newbie in investing let me put in simple terms what is mutual funds investment and how it works,

what is mutual funds investment

By looking at the above diagram you would have got some idea,

Mutual fund house will get money from pool of retail investors like you and me can be as low as from Rs.100 to as high as Rs.100 Crores,

Fund manager would invest that in stock market, bond market and make returns out of it with his/her expertise in investing.

Then that return would be distributed to you and me for the money invested.

To define it, mutual fund is a vehicle which allows you to invest money in various asset classes like equity, debt, gold, which will be managed by competent and experienced fund managers in the country.

I hope now you would have got a broader picture of how it works.

Different types of mutual funds:

What are debt mutual funds:

Liquid mutual funds :

Last week, when I was talking with my friend this topic came in,

I asked him why don’t he consider investing in mutual funds instead of keeping the cash idle in savings bank account,

He told he is paying off his loans and taking care of family expenses so he might need cash at any point of time,

This is a very short time liquidity need,

So I’d want him to consider Liquid mutual funds where the time horizon is between 7 days to 91 days,

Let’s say if you invest today and suddenly you are in need of cash within 20days, you can redeem your investment at the time without any penalty charges,

That’s the beauty of this product,

You will get return for 20days for the invested amount,

If you see the historical yearly returns are around 4% to 5%, which is higher than the savings bank rate which is only 2.75%.

Ultra short term funds:

If you’re planning for a vacation in near future any time between in next 3 months to 1 year,

I’d want you to consider Ultra short term funds where the time horizon of investment is between one month to 1 year.

Benefit in this fund is you get slightly higher returns than liquid funds, historical yearly returns are somewhere around 5% to 7%.

If you keep money idle in the savings account you may end up swiping at any point.

See the potential problem of having money in the hand.

By investing, you kill two birds with one stone, it will fetch you better returns in the future and stop you from unnecessary current spending.

Beauty of this fund is you can redeem your investment at any point of time if you are in need of cash with no penalty charges,

In case in FD you would be getting less interest than usual if the money is taken in between, which is not in the case with mutual fund.

Short term debt funds :

Next is short term debt funds which you can consider investing if your time horizon of investment is between one to three years,

Historical yearly returns are in the range of 7% – 9%,

So I’d want you to consider this fund as a alternative for fixed deposits and recurring deposits which would give you only 5.5% to 6%.

As we can see clearly mutual funds have given extra returns compared to traditional investments you would be wondering what stops you and me to invest,


Above discussed types of funds comes under debt mutual funds, In a nutshell debt mutual funds will lend money to companies and get fixed returns for the investment,

The degree of fluctuation is minimal in debt funds compared to equity funds,

But holds some amount of risk compared to bank deposits,

It’s quite obvious that there is no such thing as free lunch, as you’re taking risk within your capacity you deserve that extra return.

different types of mutual funds
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Equity Mutual funds:

These funds buy shares of company from exchange which means directly buying the part of the business,

For example: If you feel companies in IT, Pharma, Banking sectors will do better for next few years you can consider investing in equity mutual funds.

Beauty of mutual fund is you don’t need to select individual companies,

Give money to mutual fund houses where fund managers will pick good stocks based on rigorous analysis performed by the team of financial analysts,

If you see long term statistic, historically returns from these funds are quite high compared to debt funds ranges from 10% to 12%,

Of course extra returns comes with extra risks, the degree of fluctuation is quite high compared to other category funds.

Time horizon for this fund ranges from 6 to 8 years,

Because companies go through good and bad economic cycles,

Normal business cycle in India is 6 to 8 years, this is why minimum time horizon should be that much.

Remember you’re investing in the part of the business,

If you want best promoter of the country to work for you for Rs.100 they are doing because you’re owning their shares through mutual fund vehicles.

what is sip investment plan

What is SIP (investment plan):

SIP stands for systematic investment plan,

Traditionally our grandparents, parents have deposited money in banks as fixed deposits or recurring deposits as monthly savings,

Why was it RD, because cash flow to Indian households is monthly, we earn on monthly basis and save on a monthly basis.

So the concept of monthly investing in mutual fund is called SIP.

For example,

If you choose to invest in Ultra short time funds for one year, decided to invest Rs.1000 every month,

You can choose any date from the month, money will be auto debited from your account for all the months,

After one year you can redeem the invested amount and enjoy the returns as well.

People vector created by pch.vector – www.freepik.com

Lump sum investment is one time investment which means invest Rs.10,000 at a single go and redeem at the maturity date.

Both style of investments has their own strengths and weakness,

So you have to be careful in selecting which suits you.


Compared to other investment options, mutual fund is one of the best possible ways to beat inflation in a long run.

Before finishing I’d want to emphasis on this,

The above material is only for educational purpose,

Consult your financial advisor before making any investment decisions,

Happy investing !!

Impact of Inflation on Investment with Practical Examples:

India is a country with more than 50% population are middle class,

Being one, I’ve observed my parents are prudent in terms of financial planning, they try to avoid all sort of risks and prefer to be conservative.

I really appreciate them for their discipline in terms of saving because that has paid off a great education for us(for me and my sister).

But the flip side is their generation financial literacy is very less for several reasons.

They did a pretty good job in savings but they are not aware of hidden potential problems in it.

But today we are in the digital generation, internet has penetrated like anything,

With that help of that, I thought of bringing it to your notice to make you,

Understand the impact of inflation on investment with practical examples and

I’ve discussed few investment options to stay financially healthy in the long run.

investment options

Are you active in Personal money management?

Till college, we were financially dependent,

I remember it was two years ago, that is 2-3 months after college got over,

I was preparing for CFA Level 1 exam and many of my friends have started their job.

It means they have become financially independent.

I was bit curious to know what they did with their salary.I’ve asked them shamelessly.

Answer was pretty common few were paying off the loans, few were taking care of part of family expenses, in addition to that managing their own expenses as well.

That’s good to know because people have become quite responsible ,able to manage of their own and started supporting their family financially.

But deep inside one thing has kept on bothering me.

Being from a finance background I think I’m hard-wired to think in this way.

Let me share my thoughts on it,

Speaking about the savings and investment part,

People are less active in personal money management area,

Heard of this warren buffet quote “Don’t save what is left after spending but spend what is left after saving”

This might have given better perspective on what I am talking about.

Hardly people around me spoke about savings and investments,

Few of them told they have started saving in the Fixed deposit and Recurring deposit(Sounds good)

Very few of them told they have started investing in mutual funds, trading directly in stock market. (Quite impressive)

But many of them told they kept their salary in the savings bank account, (Which is not financially good in the long run)

I’ve put people in two groups in terms of making their financial plan,

1)People are busy and have no time to think about it.

2)People have given thought about it and doing it to their capacity but looking forward to make it more effective.

If you’re in the first group, read till the end to know the potential problems of not making a effective financial problem

If you’re in the second group , Congratulations!! You’re in the right place.

Impact of inflation on investment
Image by Alexas_Fotos from Pixabay

What is inflation with example:

How to work on for effective personal financial plan in the long run?

For that you have to understand this simple concept from the economics.

Don’t be scared, if you are not from commerce background, neither do I.

So I tried simplifying it for your understanding.

What is inflation….Heard of it?

Which means price of goods and services will increase over the period of time.

Few of them might be aware of this already, few might be thinking, heard of it but not bothered much about it.

See the historical inflation rate in India,

How this is affecting you and me,

We will understand inflation with simple example,

If you see the inflation rates in India are 3.4% ,4.5% for 2018 and 2019 respectively and estimated rates are 3.3% and 3.6% for the future,

For the ease of understanding and calculation, assume inflation rate will be 4% for next 5 years,

Example: Imagine for a moment you are buying 1kg Onion +1Kg Potato + 1Kg Tomato for Rs.100 today.

In 2025, that is in 5 years for the same (1kg Onion +1Kg Potato + 1Kg Tomato) you would be paying Rs.122 due to inflation, each year there will be 4% increase in price of goods and services that we consume in day to day life like house rent, transportation expenses, groceries, apparels, education expenses and in other similar things.

This is for understanding purpose, I hope you got the broader picture.

On the other side you are getting salary, after all your expenses and liabilities are met, what’s happening to the remaining money,

Option 1: You’re busy and didn’t find much time to think about it, so just left in the savings account itself.

Option 2: You might be depositing in the bank and get “guarenteed” returns

Option 3:  You might be Investing in assets like gold, real estate, mutual fund, stocks and grow the money.

personal money management
Image by TheDigitalWay from Pixabay

Investment Options to beat inflation:

Let’s discuss one by one,

Option 1,

How much do you earn in a savings account :

Imagine you got your salary, as you’re busy you just left it in the savings account itself.

I would like to continue with same example to make it easy for understanding,

Assuming Rs.100 is remaining in the bank savings account after all your expenses and liabilities are met

Since that is left in the savings account, bank will offer a very low-interest rate of return.

Assuming you are an account holder in the “Bank for every Indian” that is in SBI.

It offers 2.75% interest for one year …If you left the money in a Savings account, in the next five years Rs.100 would have become Rs.114.

By looking that we can say Rs.114 in 5 years doesn’t hold the same value of Rs.100 in today’s value.

Remember the inflation example (1kg Onion +1Kg Potato + 1Kg Tomato today’s price is Rs.100),In 5 years the same amount of goods will be Rs.122,

See Rs.100 in your hand today is enough to buy all the vegetables but if you left it in the Savings account for the next 5 years then you can’t buy the same amount of vegetables at that time with this amount.

Money in your hand is grwoing at 2.75% but price of goods and services around you is increasing at 4%. 

Technically, you are not earning any return, its negative 1.25%. In long run, inflation will have a effect on your saving which won’t be obvious to notice.

If you aren’t aware of this before I strongly recommend you to think about it and take decision after that.

Savings account
Image by Steve Buissinne from Pixabay

How inflation affects Fixed deposit:

Option 2:

Assuming you are a type of person who is highly risk averse, conservative, prudent and loves the word “guarnteed” “assured” return like my parents.

Again assuming you are a account holder in the “Bank for every Indian” that is SBI.

No personal bias towards the bank, it is coming automatically because this is the only bank I’m holding an account for last 6 years.

SBI 5-Year Fixed Deposit rate is 5.4% which means if you deposit Rs.100 today, in the next 5-years you will get Rs.130.

Remember the inflation example, (1kg Onion +1Kg Potato + 1Kg Tomato) today’s price is Rs.100 , In 5 years the same amount of goods will be Rs.122,

If you see in the absolute terms you get only 8 rupees due to inflation (not 30 rupees).

Bank gives you 30 rupees but inflation eats up 22 rupees.

Real return is just 1.4% [Which is calculated as Bank deposit rate(5.4%) – Inflation rate (4%)]

This is a rough calculation just for your understanding, hope you got the braoder pictrure.

Take away point: Return from FD is slightly higher than inflation, but in real return terms it is marginal in nature.

impact of inflation on investment
Image by Steve Buissinne from Pixabay

How about Option 3,

Assuming you’re a type of person who are less risk-averse compared to the above category, expecting to grow the money in an efficient way within your risk appetite level. 

You might be interested to Invest in assets like gold, mutual fund, stocks etc.

Gold investment returns in India:

Gold is a classic asset even my parents who are highly risk averse like to buy it.

But wait for a moment, are you buying gold as a investment or in the form of jewellary.?

Because in jewellary it’s quite complex to figure out the returns, there are hidden charges like making charges, wastage charges and all.

I’m assuming people who perceive gold as a investment who invest in it digitally or may be bought as coins.

Speaking about the historical gold prices in India,

historical gold prices in india

In the above table, I’ve fetched the price of gold for respective years from google.

In 2001-2010 decade, there was a steep increase in the price. [5x increase of price in 10 years] which is massive.

After that price was flat, gradually increased for next 5 years. (2011-2015).

In the last 5 years, there was a decent upward price movement, especially in the past 6 months there was a good rally see 13k increase in last 9 months.


Speaking about the return from gold investment,

For the last 4 years, yearly rate of return is 12.5%. (2016-2019)

For the last 9 years, yearly rate of return is 8% (2011- 2019).

Remember the inflation rate in India  which we have discussed above, somewhere around 4%.

Investment in gold would have beaten inflation with big difference.

Seems better investment opportunity right.?


Yes it does, but according to warren buffet, he told “Don’t put all your eggs in one basket”

So we can’t rely only on gold to grow the money, as there are tons of factors to drive the price.

Bottom line: Consider digital gold investment or buy as coins to diversify the portfolio.

digital gold investment
Image by Omar Hadad from Pixabay

Mutual funds return:

“Mutual fund investments are subject to market risk so read the document carefully before investing”

This is the discalimer we keep on hearing from different media channels when they advertise any mutual fund schemes.

If I start speaking on that I’ll end up writing the same length of what you have read already.

So I’ll reserve it for some other day.

Sticking to the topic, as we have discussed the returns of other investment class, we’ll do it for Mutual fund and see how much return it generated more than inflation.

Mutual funds are broadly classified as Equity Mutual fund and Debt mutual fund.

Equity Mutual Fund is further classified into bluechip funds, large-cap, mid-cap, small-cap funds.

In general, considering the diversification Equity Mutual Fund has generated 5 year-CAGR ( yearly return) of 10-12% in the past 5-years.(2014-2019).

This is based on average, many funds have generated more than 12% and , less than 10% even negative as well.

It all depends on the selection of funds and how effectively it’s managed.

Debt funds on average has generated 5 year-CAGR ( yearly return) of 7-9% in the past (2014-2019).

Remember the inflation rate in India  which we have discussed above, somewhere around 4%.

Investment in mutual fund would have beaten inflation with very big difference.

Bottom line: Consider Investing in mutual funds will maximize the returns and diversify the portfolio.

Mutual funds return
Image by Nattanan Kanchanaprat from Pixabay


I know it’s a lot of information, It will take some time to process.

Give some time and carefully think about it because it’s your hard-earned money,

To stay financially healthy in the long run, you have to be discipline,spend some time to understand the things around us, and build a growth oriented mindset to invest.

Happy financial planning!

Love to hear your thoughts, let me know if you find it useful.

I would more happy if you bring it to my notice that any explanatory part can be improved.