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.