Want to get rich? 3 questions you must answer to ensure profits flow into your bank account

An investor doesn't need ace investor Warren Buffett kind of bank balance to virtually guarantee a fortune for himself or herself. If the money is invested smartly, even a person with average monthly salary can get massive returns. Yes, you read that right! For example, if an investor starts Systematic Investment Plan (SIP) of Rs 3000 per month at the age of 25, he or she would end up making Rs 12.43 lakh in 15 years at an average interest rate of 10 per cent (Source - Clear Tax mutual fund calculator). This return would come on an overall investment of just Rs 3.6 lakh or Rs 36,000 per month. Depending on your amount invested, you can become rich and thereby you can even set the pace for yourself or targets to be achieved.     

If the same amount is invested in a safer scheme like public provident fund which offers 8 per cent interest rate, the return at the end of 15-year lock in period would be Rs 10,55,674. In either case, the money would have grown by three to four times. The investors also have other options like post office schemes, stock market, bank fixed deposits etc.

But, there is always a risk involved of putting the money in a wrong product. Also, it is tough to decide which is the best financial product for you. The job is even more challenging for first time investors. As far as this question is concerned, 'how to get rich', then you must do things in a certain way. So, to ensure that the money is going in the right direction, every new investor should put three questions to self. These are:  

1. What are my goals?

No investment is made without purpose. All the products purchased should be for a definite goal, may it be retirement planning, child education, buying home or a foreign trip. Tax expert Sunil Garg believes that it also allows investors to decide between long term and short term funds. 

"It helps you decide if you should invest in long term funds or short term funds. For example, if you are young (25 to 30 years), you will need money in another 10 to 15 years. In this case, PPF is a good investment option," he said. 

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2. Are there any tax advantages?

The next question to come in mind should be whether the product comes with any tax benefit or not. Many popular schemes like equity linked savings schemes and public provident fund allow investors to save as much as Rs 1.5 lakh per financial year. However, this criterion should only be considered if the investor's goal is to save tax and not to aggressively grow money. 

3. What are the returns?

The most important thing to be asked is what are the returns? Schemes like bank fixed deposits offer relatively low returns, they are considered a safe investment option. On the other hand, mutual funds and ELSS may promise better returns but come with more risk. 

Garg said that this also allows investors to check the authenticity of a product. He said that if a scheme promises to offer more than 20 per cent return, the investors should get alert as it might be a ponzi scheme.