Sunday, April 8, 2018

My Passive Income Report for the Year Ended 31st March 2018

I publish my passive income report every year. Passive income is the key to financial freedom and getting rich. Investing is the only way to create passive income for a majority of us who are not gifted with special talents. I write this post to show you how small but regular monthly investments can build streams of passive income
Let me present here my passive income report for the just-ended financial year 31st March 2018.

Let's study the following bar chart. This graphic shows the growth in the passive income.

I also add the following supporting information that makes the chart more readable.

Passive Income Report: 3 Streams of Passive

We can see that there are three categories of passive income here. These three forms are as follows:
  • dividend,
  • interest and
  • profit from the sale of investments.

You can also observe from the chart and the table that the dividend income is steadily growing. This is on the back of increased investments in stocks. It is equally important to note that interest income has fallen drastically from Rs.70,512 in the year 2016 to Rs.38,846 in the year 2017. This is not because of any reduction in the investments of interest-bearing assets but owing to the steep cut in the interest rates on bank deposits. You will appreciate this from the graph showing various forms of investments.

Passive Income Report: Total Investments

We have maintained the bank fixed deposits (FDs) more or less at the level. You can see that direct investments in stocks are steadily climbing. In the financial year ending 31st March 2018, the life insurance company had pre-closed a mutual fund linked life insurance policy for an inadvertent delay in paying the premium. I do not intend to invest in life insurance policies anymore as they are beneficial for those who begin when they are young.

In the year 2018, I have added two new investment products namely public provident fund (PPF), equity-linked savings scheme (ELSS)and special, tax saver bank fixed deposits. I was primarily trying to take the tax deduction under section 80C of the 'Indian Income Tax Act'. This act allows a deduction while computing taxable income to the extent of Rs.1,50,000 a year on certain investments.

ELSS is the only equity-linked mutual fund instrument that qualifies under the section 80C. Though I made a beginning with ELSS I restricted the amount to just Rs.20,000 as the fund managers were investing only in the blue-chip companies which were very expensive. I will increase the allocation when the markets become more reasonable or depressed.

I invested Rs.10000 in PPF this year. PPF offers a higher interest compared with bank deposits and also brings certain legal protections. One limitation is a very long investment lock-in period of 15 years. This is actually not a concern for a value investor, who anyway is a long-term investor. But the real concern is that PPF does not give the kind returns that stocks can. However direct investment in stocks does not enjoy deduction under 80C. Therefore, I will slightly increase the allocation for PPF within the overall eligible investment limit of Rs.1,50,000 in the coming years.

I invested a total sum of Rs.1,05,000 in the tax saver bank fixed deposits. I also had to break and use a sum of Rs.1,00,000 from the existing, conventional fixed deposits, for replacing my old car. So the net increase in bank fixed deposits is a mere Rs.5000.

My Passive Income Report: Small but Uninterrupted Investments

My monthly investments are small but uninterrupted. Please see my investment habit monitoring table below.

The Conclusion of my Passive Income Report

I am glad to see and share with you the steady growth in the passive income in just three years (I created Portfolio 2K15 only in February 2015, virtually the very end of the financial year ending 31st March 2015). My small but regular investments could contribute such good results. You too can surely benefit the same way.