Every week, we read news of companies in India and abroad announcing a massive round of layoffs. Hundreds and thousands of hard-working employees are let go, in most cases without any advance notice, because of cost pressures. Organisations have short memories and move on immediately; however, the employees and their families bear the brunt for months and years.
One can never perfectly predict economic circumstances and the resulting corporate actions. However, if you depend on a job or a business for your sustenance, it is only prudent to diversify your income sources. So if, due to any circumstance, your core income stops coming in, you at least have some backup streams to tide you over. Here are five investment ideas that can achieve the same for you.
Fixed Deposits: One of the most traditional savings products, these have been used by generations of Indians to secure their future. Park some funds in fixed deposits, and your principal will keep earning interest, which you can either withdraw or reinvest. And if you have chosen a large, well-managed bank, it is virtually risk-free.
Dividend Stocks: These are stocks that traditionally pay a high level of dividend. You will receive dividends from the companies every year, which could sometimes even exceed fixed deposit returns. And you will also participate in the capital appreciation of the stock. Stocks, of course, are much riskier, and you could lose some of the principal. But the risk gets reduced if you have a long-term horizon and a diversified portfolio.
Mutual Funds: You could also invest in debt and equity mutual funds and build a corpus over time so that if the need arises, you can systematically withdraw some of your principal. You can either redeem a fixed amount each month or even choose a dividend payment option and earn a monthly income from your mutual funds.
Real Estate: Property is generally a good and safe long-term investment with immense potential to generate regular income. A house, office or commercial space can be rented out relatively quickly to generate steady rental income. If you lose your primary source of income, this could be extremely helpful. And when it comes to capital appreciation, real estate is a good investment if you have a long-term horizon. The value of your property, given time, will almost always go up.
Annuities: These are gaining popularity as a retirement and second income option. A lump sum investment is made into an annuity product, typically offered by insurance companies, and one gets a regular fixed payout, month after month. The payout is locked in for life, which gives a tremendous level of certainty to an individual or family. And given the regulations and strength of insurers, it is virtually risk-free.
With adequate planning, there are multiple options for someone to diversify and build alternative income streams. Of course, opportunities will vary based on one’s risk appetite, and you must ensure that you invest in products that suit your temperament.
You do not want to find yourself in a situation where you lose your primary income stream and your safety net simply because you chose the wrong products. Therefore, you must consult with financial experts who can help you understand your goals and risk profile and suggest products accordingly.
As the cliché goes, the only thing certain is uncertainty. You cannot predict when bad luck will hit you, but you can certainly plan for it. Diversifying your sources of income is a crucial step to preparing for economic uncertainty.
Rishi Piparaiya, Best Selling Author and Financial Mentor
