Remember in childhood we wondered like “Does money grows on a Money plant”? Well I’m pretty much sure this sounds stupid but fairly speaking we all believed in this and then we grew up and realised it was a complete malarkey. But wait there’s another fortune and trust me its practical and not some fantasy magic wand and most of us probably don’t know much about it. This is a avenue where you can park you hard earned savings into some assets and eventually these assets will increase in value over a certain period of time and will surely give you some handsome savings in future for a Europe trip or a destination wedding in Bahamas. So let’s explore what this whole stuff all about and understand the need behind this.
So you guys must be wondering what exactly are we talking about? Before jumping into this we all know that there are simply two ways to earn money in the modern world firstly you work for someone else or have your own business/Startup like that of Elon Musk or Mukesh Ambani and Secondly is through Investing . Yes we’ll be discussing about Investing starting from very basic, the need of hour for the Novice Investors to start Investing.
As Wikipedia says ” putting (money) into financial schemes, shares, property, or a commercial venture with the expectation of achieving a profit”. Let me start asking from you ‘ ”have you heard about Investing a big “NO”. Let’s forget about us our own parents even don’t know much about options available. They have pretty much clear Investment options like Real-Estate, Bank FDs, Gold that’s it. No I’m not saying that’s bad idea but I they are illiquid Assets i.e you can’t encash them in need and requires a hell lot of Investments to earn a decent returns. On the other hand if we talk about Investments in Stock Markets, Mutual funds, ETFs, bonds, Corporate debt Schemes etc.. Does not require heavy Investments you can start as low as ₹100 and start building your portfolio in very early age to create handsome financial worth earliest as possible. So I’m sure you are much clear regarding Investing Moving forward Let’s find out the need for one to Invest.
1. Compounding
Everyone has Heard a golden statement from a genius Mind Albert Einstein “Compounding is the Eighth Wonder of the World One who knows it Earns it and who doesn’t pays it”. It’s very well true earning money on the money already earned and creating wealth over time.
2. Beat Inflation
Year 2019 1 litre full Cream Milk =₹50. Year 2020 1 litre full Cream Milk =₹52.
You see the diffrence in the price of same items changed over a course of 1 year its due to Inflation. Generally inflation rate in Indian Economy is 5%. So you would lose 4 to5% of our money every year if kept as cash. Returns from the investing helps you to maintain the purchasing power at a constant level. If you don’t beat the inflation rate you’d be losing money, not making money.
3. Retirement planning
You worked so hard your proffesional career and at retirement age you wants to live life with some peace without thinking much about Your income. Investments can act as your passive income and financial dependency upon other is reduced drastically
Why Investing Early is Considered A Good option?
Why should I care about Inflation, retirement, Investing” Every young gun out there when questioned about Investing. But this holds quite true I mean youth life is Considered the best part of one’s life where teenagers explore more about world and their fascination and dreams have no boundaries. Carefree and chill life but the below example will blew your mind and will make you aware of what we call FOMO ( Fear of missing out)
In above example student A was financial literate and realised the Importance of Investing habits he started saving at the Age of 18 with amount of ₹50000 annually. On other hand we have Student B just like us full of life and never actually took investing seriously. They both gradutued and started with their jobs at the Age of 26 till the time student A stopped his Savings and at this time someone introduced investing pros to student B and he started his Investinv journey 8 years later than our financial literate guy! Also take note that athe amount saved will not be withdrawn until the D-day Aka. Retirement date.
Did you noticed the amount actually saved in the end? Yes that’s true. So you invest early with small amounts then enjoy a better position in future and also this amount is after beating inflation and have some tax benefits as well so its a win-win situation from all sides.
So I’m sure after going through this article you realised why one should be early bird while planning for Investing. But be careful Investing does not means you open your terminal i.e demat account and start betting on equity directly without any prior knowledge as this can blow up your savings. Remember Investing isn simple but not Easy. Their are various assets classes in which you can invest your money like mutual funds, bonds, ETFs, liquid funds , index funds and many more. Don’t worry we’ll be discussing them in upcoming articles because we got you covered…
Till then Happy Investing!!
FinVega 