Why should I invest?
Prerequisite of the question, Where should I invest is! Why should I invest? Remember the days when you just got your first job – your father probably told you to open a recurring deposit account in a bank and make all your tax saving investments in provident funds. After all, who would give you assured returns with a capital guarantee? Those were words of wisdom, then, but not anymore. Times have changed and how!
Inflation is eating away your returns
Today, inflation is eating into your returns even as you sit here reading this. If your monthly expenses today are Rs 15,000 and annual inflation is at 5%, 20 years later, when you will probably retire, expect your monthly expenses to rise to at least Rs 39,000. Bank deposits will give you a return of 6%, but post inflation and tax; you will be left with a rate of return which runs into the negative. This means that while on paper your returns look a healthy 6%, your capital is actually eroding in the real world.
You are going to live longer
Thanks to increased life spans and advancements in medicine, research shows that you are now going to live much longer. Your grandfather worked and earned an income for 25 years of his life, he lived for another 10 years past retirement. Your father worked the same number of years but lived for 20 years post retirement. You will probably work almost the same number of years that they did, but in all probability live even longer! Therefore, you have a lot more saving to do to plan and enjoy those extra twilight years of your life.
You have a substantial standard of living to maintain
Today, you drive around in an SUV, are a member of that elite countryside club where you go golfing every Sunday, you treat your family to a fine dinner at least once a week and of course, love those weekend getaways to holiday resorts. Do you ever shudder at the thought of how many of these luxuries will you be able to afford after you retire? Wealth creation is all about making your money last in order to continue enjoying all of these luxuries.
Your families are getting smaller and nuclear
Higher economic growth rates have resulted in widespread migration to urban areas and the proliferation of the nuclear family system. Consequently, the number of households has increased substantially and the security provided by the joint family system is coming to an end.
Most of the largest expenses in life are planned expenses. For instance, purchase of a home, your child’s education or marriage, your own retirement and so on. These expenses will be incurred no matter what and you must create wealth to meet the same.
So, Now ask yourself: Why should I Invest?
Know how you can begin investments in stocks.