Share Market and Students - Importance of Investing

Hey guys, I hope the first blog was successful in creating a bit spark regarding the Share Market. We there, had dealt with the what actually share market is and the basic concepts related to share market. So we now have a comprehensible idea of share market. So lets dig down further.

Share market is home for two mindsets

investing and trading. Rather than diving directly into these types, we’ll initially try to understand the importance of investing. 

Investing the hard earned money into assets which provides enough returns helps to sustain through the retired life. But investing is a life long affair and one has to devise a efficient plan to save and invest throughout the working years. The following example will clearly help to understand the benefit of investing over accumulating.

Assume you earn 50k per month with expenses of 30k and you are left with 20k a month. You are given a hike of 10% every year. Assume cost of living increases by 8% every year. You have planned of working about 20 years from now. So considering all these factors here a chart of how much wealth you could accumulate after the end of 20 years. 

After twenty years of hard work you would have earned a sum of 1.7 crore. Still considering the rise of 8% expenses this sum will you help you to sustain up to 8 more years. Thereafter ?

Now, lets consider rather than letting your wealth accumulate you choose to invest in a asset which has a growth rate of 12% per annum. So here’s the chart for such a investment. 

At the end of 19 years, the 1st years’ investment of 240K grows up to the sum of 2.7 crore. If you add up the final values we get a massive corpus of 4.2 crore which is 2.4 times what you would have otherwise saved. Clearly this is the reason for investing. 

Happy Retirement ;)

Investing helps you to fight inflation, create wealth and attain the financial freedom one that everyone wishes for. Investing is attainable though any of these assets below.

    • Fixed Income Instruments 

    • Equity 

    • Real Estate 

    • Gold 

What we eyeing for is equity. Investing in share market includes buying the shares of publicly listed companies on BSE or NSE stock exchange.

When an investor invests in share market unlike fixed income there is no capital guarantee. But wise investing in Indian Markets have generated a return of 14%-15% CAGR (Compound Annual Growth Rate) for past 15 years. Investing in some of the best Indian companies have also a return up to 20%. But identifying such investments require a quite hard work, skill and patience.

This was all for this blog. Hope the importance of investments is understood well. In the upcoming blogs we’ll try digging more into value investing and trading; investors and traders.

Just a note we all are acquainted with successful traders but never come across most successful traders.

Until next time.

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Insights : Varsity By Zerodha.