Abhi
Ever wondered how to invest 1000 rupees in your pocket, but had no clue where or how to invest? I have. Since I had no clue, that Rs.1000 usually got spent on some meaningless thing I never really wanted in the first place (damn that bloody glue gun I bought out of boredom and never used once!).
Important when saving a small amount
It is important that you kill any thought that comes to your mind saying “It is just a small amount, why bother saving it?”. It is precisely this kind of thinking that hold you back from Financial Independence. Forget Rs.1000, I at times put Rs.50 to buy crypto currency or gold as investments.
If you think far ahead, this small amount of money will get you huge returns down the line when compounding interest is applied to it.
Plan and set right expectations
The other thing to keep in mind is that you are starting small. So don’t expect great returns or income initially. If you start with high expectations, you are bound to be let down. Keep realistic expectations and maintain consistency and you will achieve your goals ultimately!
Best place to save a small amount
There are several great areas you can start putting your 1000 rupees. Here is a look at a few of them.
Emergency Fund
The first question you should ask is, do you have an emergency fund set up? If the answer is no, then you are better off adding this Rs.1000 into your emergency fund. The returns on this will be about 3% to 3.5% standard interest you get on the money in your bank account. However, the payoff is when you are in need of money, you will have this readily available. Safety and peace of mind is as important, if not more important than earning better returns.
Where to maintain emergency fund
Try to keep your rainy day fund somewhere other than your regular savings and transactional account. Possibly a different bank account or an online wallet such as Paytm Bank or Airtel Money. You can keep it as cash at home, but you loose out on the 3-3.5% interest it would generate in a bank account.
Another option is to use an app like ET Money to buy Liquid ETF with your emergency fund. These funds can be sold and you will have your money in 1-2 days back in your bank account and they give you about 7% interest. ET Money funds usually allow a minimum investment of Rs.1000 and upwards.
Investing Rs.1000 in stocks
If you are young and starting your investment journey early, one of the best options for you will be to put the 1000 rupees in the share market in India. Consistently save this money, month over month. Do not buy cheap stocks that get manipulated easily. Instead, focus on building a portfolio of great companies with strong business.
Don’t consider trading with your 1000 rupees or any other form of get rich quick strategies. Be disciplined and keep building up your investments steadily. Over a period of time, this small investment will grow into a huge investment portfolio you, your children and even great grand children will be proud of!
Read our detailed article on investing 1000 Rupees in stocks.
Buying Mutual Funds for 1000
Mutual funds and ETFs are another great option to be adding small investments over a period of time. This is for you if you are not sure of navigating the market, not comfortable choosing the right equity or stocks and want to avoid trading, staying invested for long.
The return on most funds take time and you need to consistently keep adding money monthly to buy units. Unlike stock market where shares jump up in a short time or go down in a short time, mutual funds are slower and take time to appreciate.
As an added advantage, mutual funds allow you to get a tax benefit for the money you put in them. Check out the fund details and terms as this varies from fund to fund.
You can use ET Money to invest if you are looking for an account. The app allows you to set up auto debits from your account so SIPs can be processed automatically towards the fund you choose, on the date and amount you want.
Investing Rs.1000 in Gold
Indians and gold share a closer bond. Rs.1000 may not get you a gram of gold. In India, you have apps like Paytm, Freecharge, ET Money and many more that allow you to buy digital gold. This can then be used to buy 1000 rupees worth of gold every month. At the end of one year, you would have systematically bought Rs.12,000 worth of gold!
Gold appreciates and helps you against inflation and as such a must in your investment portfolio. Buying digital form of gold will also mean you need not worry about wastage, making charges, storage etc. These are going to be free.
Another option is to open an account with Zerodha. You will be able to buy ETF gold or Goldbees and hold them in your demat account. These are highly liquid and can be traded easily. This is a better option as you avoid the taxes and processing fees when buying on Paytm and other apps.
1000 Rupees in Fixed or Recurring deposit
This is by far the safest route. But I am adding it to the end of the list as I am assuming you would like to take a little more riskier option such as buying equity shares or gold with you money and getting higher returns.
If that is not the case, simply open a recurring deposit with your 1000 bucks and see the power of compounding work it’s magic. Rs.1000 you add to a fixed deposit will grow to Rs.5000 if left untouched in 20 years. If you keep adding 1000 bucks per month for 20 years at the end of that time, you would have invested 1.2 lakhs but will be getting about
Other places you can invest 1000 in
Loans to family and friends
This is a tried and tested way to earn a passive income on your money. Make sure the person you are lending to is trustworthy and will pay back. If yes, then you interest earned can be anywhere between 9% to 15% and even 20% at extremes. Loans are a big part of my portfolio and I get about 15% interest per annum.
Saving Rs.1000 in Chit-funds
Chit-funds in your locality can be a great way to save up this money. There will be chits that accept small amount of investments every month. In this way, if you need money for any emergency, you would be able to take out the total value of the investment at a discounted price. Or alternately, you have an option to wait till the chit tenure is over and get a return ranging between 7% to 12% on your investment.
With all the scams on Chit funds in India there is a negative perception on them. But that does not necessarily mean they are bad. Be choosy and avoid new chits. Pick a trustworthy company that is registered and gives you positive vibes.
Buying Crypto currency with 1000 rupees
You can consider buying crypto currency on a monthly basis with Rs.1000. However not the best of options and depends totally on your preference and risk tolerance levels.
Minimum amount varies from platform to platform on how much you can buy. But Rs.1000 is a decent amount and most platforms will allow you to by crypto currency and move it to your wallet. For 1000 bucks you can get about 0.0014 Bitcoin (BTC) as of today.
Investing Rs.1000 monthly with tax benefits
It is possible to save this amount every month and also get a tax benefit on it. Say you fall under the 10% tax bracket. If you invest Rs.1000 every month, then end of the year you have saved Rs.12,000. Also, you save 10% of taxes on this 12K which works out to Rs.1200! Here are some options to save this money and get a tax benefit
Sukanya Samriddhi Yojana
If you have a girl child, you have an option to enroll under Sukanya Samriddhi Yojana(SSY). You can visit the bank you hold an account in and they will help you out.
Once you have an SSY account open in the name of your daughter, you can save any where between Rs.1000 to Rs.1,50,000 in a year. The interest on this account is 7.6% at the moment and the money you invest in it is tax free under section 80C of the IT Act.
This scheme is specifically for meeting the education and marriage expenses of a girl child. So once you add money, you will not be able to take it out till 21 years from opening the account or till the marriage of your daughter. So consider this from a liquidity perspective as well.
National Pension Scheme
You can consider adding money by opening a NPS account. This carries returns ranging from 7% to 10% depending on the fund manager and risk profile you choose. Money invested in NPS is tax free upto Rs.1,50,000 under sec 80C and an additional Rs.50,000 under section 80 CCD.
Like most tax savings option, NPS too is not liquid, money you invest here is only withdrawable (max of 60%) once you reach age 60. The remaining 40% will pay you a recurring monthly income after age 60.
