Investing is the most important part of financial planning. Rich people receive 70% of their income from investments. Investing and financial management is something that can make you achieve financial freedom even if you do not have a high paying job.
But you might be thinking that there are many investment options then why I mention only about stocks. This is because after reading many books and researching through some data I found that stock market indices beat all other easily accessible asset classes in returns.
There are numerous benefits of investing in stocks which I will mention in this blog. No doubt there are some risks involved but the risk is worth taking and it can be minimized by proper planning and education.
Investing Will Make You Rich.
Yes, you heard it right. Stock is an interesting investment option. Indian stock market on an average is growing at 15% per annum and you must not miss this opportunity.
I will give you a simple figure on how you can be rich. Suppose you started investing Rs 5000 per month at 15% per annum and you invested for 40 years then the total amount which you will have after 40 years will be approximately Rs 15 crore and this amount is sufficient to live a decent life.
Now, you will have a question does the Indian share market will keep growing at this rate? According to reports and great investors of India, India will keep growing at a rapid rate and by 2030 it will be the second-largest economy.
You must watch a video on YouTube of Great Indian investor Ramesh Damani Sir on “how to make Rs 100 crore by investing Rs 10 lakh” and you will be amazed by the figures presented by Sir Damani on returns from stocks. One of the great Indian investors has said that the best time to invest in Indian share market is the next 20 years.
Have you ever noticed what is the interest rate you get for keeping your money in a savings account? It is about 3.5% to 4% per annum depending on the banks. You must be aware that purchasing power of rupees decreases every year which is known as inflation and the inflation rate was 2.44% in the year 2018. It means that the value of your money decreases by this rate as compared to the previous year.
No doubt savings is very important but to beat inflation you must invest. You must invest at least 10% of your income. The fixed deposits in the bank provide a 7.5% interest rate per annum but stocks can give you 10 to 15% return or even higher.
The money in your savings account, fixed deposits are safe that’s why their return is low but the money you invested in stocks may decrease in value when the market is down that’s why it is not advisable to invest the money you can’t afford to lose but in the long run, stocks of good companies will give you high returns and hence the risk is worth taking.
Saving and investing both are important. Saving is for security and investing is for high return from your money. Suppose your salary is Rs 50,000 and you decide to save 10% of your salary. Now, you have Rs 5000 that you saved from your salary then put Rs 2500 in your savings account and invest Rs 2500 in stocks. If you do not want to invest in stocks by your own then buy a good equity mutual fund or index fund in which your money will be managed by mutual fund managers.
One golden rule in investing is to hold your stocks as your parents or grandparents holds gold. If you will hold stocks of a good company as long as your parents hold gold you will get a huge return from stocks.
Let me show you a simple figure. S&P 500 is an index of 500 stocks.
You Don’t Have To Run The Business
Share market is an amazing place where you can own a part of a business that you don’t have to run. Imagine you bought some shares of Reliance Industries then you don’t have to run Reliance Company.
If the company performs better in the upcoming years then the economic value of the share will increase and you will be benefitted by the return without running the company. You can assume that Mukesh Ambani Sir is working hard to give you(the shareholder) high return if you are the shareholder of Reliance Industries.
Your Money Is Working For You.
This is a very important aspect of stocks. In a job you get paid for the work you do i.e you are working for money but investing is something in which your money is working for you. You just research a stock and invest your hard-earned money to work for you. Warren Buffett has also said, “If you don’t find a way to make money while you sleep, you will work until you die”.
Thanks for being patient and investing your precious time to read my blog.
Comment below if have any question?