Most of the investors are trying to figure out in which path they should go, Growth or Fixed Income. Growth means that your investment will rise substantially giving compounding effect and it wukk generate wealth. Whereas the Fixed Income Or so called Dividend means that you will get the profit and along with that there might be some growth but not guaranteed.
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So people who wants to earn big wants to go with the growth option whereas one who wants more passive income can go with the dividend income. There are quite a few options for the fixed income, in Indian context you have stocks which pays good dividend, you have bonds which pays around 9 to 11% returns and so on.
A lot of people starts with growth and once they get good amount of money, they move their money to the fixed income and get healthy fixed income. And that's actually good thing. For example, if someone has an expense of Rs 50K and if someone can generate atleast Rs 25K from the fixed income then he or she will be en route to financial freedom.
But I feel it should be a combination of both. In the initial years, it should be more growth and less fixed income. And once you have a good amount of money then start moving funds from the growth to the fixed income and try to match your expenses with the fixed income. You will reach to a point where your expenses will be totally managed with your fixed income and whatever you are earning can be totally used for more growth or more fixed income, it's upto you. At this point you are financially free.
This is where the passive income comes into picture. For example, if someone who has an expense of Rs 10K per month and if he invest around Rs 12 Lakh in a Fixed Income generating 10% returns then he/she is financially free. So the formula is Monthly Expense X 12 X 10 and 10% returns ti be financially free. I have not taken inflation or tax into account but that is manageable because you will be continuing working.
