Savings vs Borrowing: Which is better investment option

Borrowing money for any business enterprise or investment comes with an element of risk. There is a cultural belief that investing in the stock market is akin to gambling, but those who wanted to take risks will go ahead while others tread a cautious path. But, the stock market expert Tumma Balraj advises investors not to invest by borrowing money.

Hyderabad:Many, who have enough money and wanted to enhance their assets, search for good options. Here comes, stock markets, if we invest in the market by taking the advice of stockbrokers sky is the limit. In fact, investment in stock markets has increased tremendously in recent times and many benefited from it. Seeing this more people want to invest in the market. While others, who do not have money, are borrowing to invest in the market hoping to earn big bucks. But, stock market expert Tumma Balaraj says that it can put you in trouble.

Stock market experts advise those who wanted to invest in the stock market not to borrow money and invest. They are of the opinion that one should always use one's own money for investments and it is not right to borrow and invest. Let's find out why.

"I am 24-year-old and recently got a job. I want to take a term policy of Rs 75 lakh. In addition, the idea is to invest Rs 10,000 per month. What should be my financial plan for the next 15 years? asks Naresh

It is a good idea to take a term policy to provide financial protection to those who depend on you. Make sure the policy amount is 10-12 times your annual income. Try to split this amount and take it from two companies with good payment history. Also, choose personal accident insurance and disability insurance policies. If you do not have a health insurance policy, you should take one. Invest the Rs 10,000 in diversified equity mutual funds through a hierarchical investment scheme (SIP). There is a slight risk, but there is a chance of a good return in the long run. If you invest Rs 10,000 per month for 15 years .. you can get around Rs 44,73,565 with an estimated return of 12%. Keep increasing your investment as your income increases.

Mahipal wants to take a personal loan and invest in shares and the interest on the loan is 13 per cent per annum. "I came to know we would get more returns if we invest in the stock market, is it true?" If yes, what precautions should be taken?

The performance of the stock markets has been much better over the past year. Those who invested during this time saw good returns. It should be noted that in the stock market there are not only profits, but also losses. Always use your own money for investments. Moreover, it is not right to borrow and invest. When you take a personal loan you have to pay interest as well as processing‌ fees. The total interest rate is more than 13 per cent. So, instead of borrowing and investing, keep in mind the EMI you pay for the loan and allocate that amount to equity mutual funds on a monthly basis. Invest in the stock market only when you want to continue investing for more than five years.

"Our baby is six-year-year old and we want to invest in PPF and Sukanya Samridhi Yojana scheme in her name. We can allocate Rs 8,000 per month," suggest investment options, urges Shweta

Public Provident Fund (PPF) and Sukanya Samriddhi Yojana schemes are safe. Both of these can be used for tax deductions. Income is not taxable. Invest Rs 5,000 out of the Rs 8,000 you want to allocate in the Sukanya Samriddhi scheme. Sip the remaining Rs 3,000 into hybrid equity funds. Sukanya Samriddhi is currently receiving 7.6 per cent interest. If you continue to invest Rs 8,000 in these two schemes for 15 years, you will be able to get Rs 30,50,158 with an average interest rate of 10 per cent.

"I'm going to retire in two months and after that, I want to invest to increase income regularly on a monthly basis. Can I invest in liquid funds instead of bank fixed deposits?" Krishna seeks an investment option

In the present scenario, the returns on fixed deposits are higher than on liquid funds. You can deposit your post-retirement benefits in the Post Office Senior Citizen Scheme or Prime Minister Vaya Vandana Yojana also. Of these, a maximum of Rs 15 lakh can be invested. You can also check the Post Office monthly income scheme.