The most important point about regular returns investments is to provide regular returns, only when regular returns are required, and not otherwise. We misunderstand the true purpose of regular return investments. A regular return generally means a monthly or quarterly cash flow that should come to my account to help me to meet my normal living expenses. I am not earning a regular return therefore I need my investments to give me a regular return. This is not understood by many.
This one feature of the regular returns where most investors make mistakes. When we are getting income from our productive working life, it would be extremely foolish to put our savings in further regular returns investments. This is the major mistake people do. I am earning, all my savings going to the bank deposit. What am I achieving? I am generating interest income. That interest income is fully taxable. Worst about this is, there is a concept called Real Rate of Return (RRR).
The rate of return = Taxation – Inflation
Very often on the long run, the rate of return on regular returns investments turns out to be negative. So the foolishness is investing in regular returns types of avenues during our economically productive lives. Even when we retire, we have an option to withdraw from our growth investments.
In an equity mutual fund, for example, there is an option called Systematic Withdrawal Plan (SWP).
To know more about Systematic Withdrawal Plan (SWP) – Schedule a call today.