“If You’re Not Investing You’re Doing it Wrong” – Warren Buffet
Trust you are doing well
Many times we often hear from our Parents or friends that the stock market is “gambling” or “no one can make money from the stock market” etc…So what drives their mind to these sorts of assumptions ? It could be many like They lose their money in the markets or they have seen people losing big money in markets or most likely they don’t know much about the Investing.
Let’s see the bigger picture…
Assume that You want to do the partnership in companies like Reliance or TCS with the amount of 10000. What would you do ?
It seems near to impossible.
Why would any billion Dollar company offer you to do partnership with the capital of just 10000. Here the Stock market plays an Important role. Many Investors or people don’t understand the basics of the stock market.
Investing in the companies through the stock market is equal to Partnership in the respective companies in which you are invested. So when you buy a stock of any company means you are giving your capital to the company and the company does business with that capital and share the profits through the rise in stock price and dividends. So if a company needs capital to do business, it gets listed on the stock market and raises capital through the investment fund and individual or so.
Now Picture looks amazing, doesn’t it ?…
Let’s see Why stock markets ?
India is one of the highest growing economies in the world. In a country like India FD rates are around 6.10% to 7.10%. Let’s say the inflation rate in India is around 4.20 to 6%. So if you are investing in FDs, then the effective return on your capital is around 1.1 to 1.9% only…..!
It looks scary..
Now if you have any car loan or home loan where interest rates are around 9 to 10%, then you are paying from the future income of your own. God save you…!
Now let’s look into the returns of real estate. So after 2010, real estate prices fell drastically and if you bought real estate in 2010 then returns are hardly there.
You need something which beats inflation,creates wealth and fulfills all your goals.
Now let’s look at the returns of stock markets :
Sensex CAGR Returns of last 40 years is 16.1%, isn’t it Great ?
We have seen many severe correction like
1991 – Liberalization of India
1992 – Harshad Mehta scam ( Sensex fell 12.2%)
2008 – GFC(Great financial crisis) ( Market fell 60% in one year)
2016 – During demonetization ( Market fell 10%)
2020 – Coronavirus ( Market falls 40%)
Despite these giant falls, Sensex rose from 100 to 42000…! (Don’t surprise)
The simple logic is you are investing in the companies through the stock market. You will earn returns and create wealth till the company earns profit.
So what could be safer than this ?
Another Interesting thing, Let’s say if you are planning for your retirement and you decided to put your money in FDs.(Rate:6.50%). At the age of 30, you put 1 lakh into the FD and after the 30 years, at the age of retirement you will get roughly 7 Lakh at the age of 60.
Now let’s say if you hire an investment advisor and structure your portfolio and get the dividend yield of 3%. So let’s assume the returns are around 13% which is proven by many funds, your corpus will be 39 lakh…! Difference of 32 Lakh (Power of compounding). So here you are getting double benefit: Dividend on your capital and Capital appreciation which is big missing in the FDs. (Double Benefit).
(Note: figures are Excluding Inflation.)
So Choose wisely for your goals
In other words, the Stock Market makes your wealth while you are sleeping…!
Remember, In the world, everything is Risky ( Whether it’s less or High ). Risk is a part of everyone’s life as no one knows the future. So If you are not taking a risk then you are doing something wrong.
If you want to plan your investment according to your goals, it would be wise to hire an Investment Advisor if you don’t know about Investing.
“To lose your capital is costlier than pay a little fees to an advisor”
If you have any queries, please comment and if you want to understand the mutual fund then visit below link
Thanks and Happy Investing………….
Note: The above is not a research report but information as available on public domain and it should not be treated as a research report
Registration status with SEBI: I am not registered with SEBI under the (Research Analyst or Advisor) regulations 2014 and as per clarifications provided by SEBI: “Any person who makes recommendation or offers an opinion concerning securities or public offers only through public media is not required to obtain registration as research analyst under RA Regulations”
Disclosure:Readers should consult their financial advisory before any investments.