We keep hearing that one should invest in the stock market. But who wants to take the high risk? Here are 10 benefits of investing in the stock market that may change your mind…
Investing, stock markets, shares, etc. are some terms which we try to avoid in our lives in order to avoid risk.
I am assuming that you know the basics of stock markets and how they function. For a more simplified understanding, read Technical Chart Analysis Of Indian Stocks 2019 – Complete Guide
If you are new to the market or whether you are dubious as to why you should opt for investing rather than keeping your money in a bank account, then this article is for you.
Below we have some major pointers that will surely convince you to at least give the stock market a try.
- 1 1. Invest to grow your money – Benefits Of Investing
- 2 2. Historically, Stocks have gone up
- 3 3. Magic of Compounding
- 4 4. Idle Money sitting at Home will lose Value
- 5 6. Investing in Stocks is Easier
- 6 7. Liquid Funds
- 7 8. Invest to grow your Retirement Fund
- 8 9. Invest in order to diversify your Income
1. Invest to grow your money – Benefits Of Investing
I know you must be thinking that why to invest when you can simply get a Fixed Deposit done and earn interest on your spare cash.
The reason you should opt for investing is that it will give you greater returns over time than a fixed deposit.
To give you a clearer picture, let me resort to an example:
If you save Rs. 1 lakh each year in a bank account for 30 years, you will have 30 lakhs plus some meager additional income of 3 to 4%.
However, if you invest your Rs. 1 lakh every year for the next 30 years that gives a return of around 10% per year, you would have Rs.6.97 crores!
Money doesn’t grow on trees, but money definitely grows with investments! One of the major benefits of investing.
2. Historically, Stocks have gone up
More than any other financial asset, it is the stocks which have consistently risen.
Yes, there are ups and downs in the market, terrible stock market crashes and hopeless periods of recession, but still, the stock market has somehow always managed to rise.
It is true that if you invest for a very short period of time, then you may face a downfall and thus face losses.
However, if you invest for a long period of time (which you should ideally), then it is likely that you’ll make profits since the stock market will eventually go upwards in a span of 20-30 years.
Amazing benefits of investing in stocks right?
3. Magic of Compounding
In the example illustrated above, you can clearly see the magic of compound interest. It resulted in exponential growth.
Compound interest shows its magic during longer periods of time. The more time there is, the more amount will get accumulated and the more interest will get compounded.
Also, obviously, this magic works best when you invest. Hence, in order to witness the exponential growth of your funds, you must start investing in the stock market.
4. Idle Money sitting at Home will lose Value
You’ve probably heard the term ‘Inflation’ before.
So basically, inflation is something which makes everyday items cost more than they used to do.
That’s not it. Along with an increase in the expenses, it obviously leads to a decrease in the value of cash as well.
For example, if earlier you could buy two packets of biscuits with Rs. 30, now you can buy only a single packet of chips with Rs. 30.
Have you ever heard your grandparents go, “Humme toh 10 rupee bhi 100 ke barabar lagte thay” (In our times, Rs.10 held as much power as Rs.100 do now). When you know the benefits of investing in stocks why keep your money idle?
It’s true. Inflation is a monster which is eating away our savings.
Hence, if you keep Rs.10,000 under your mattress and take it out after 10 years, it won’t be shocking if you realize that its value has decreased to Rs.1,000 only.
So, how to beat this monster called inflation?
Through investing and making your savings work for you.
So, if you have enough money saved to buy OnePlus 7 and you put that money under the mattress, after 30 years you’ll be able to afford only a…iPhone 4s.
But, if you invest that amount wisely in the stock market, after 30 years, you will definitely be able to buy an iPhone 11 Pro (Promise, you won’t have to sell your kidney! Just kidding!)
5. Stocks are better when compared to other investments
Stocks, well most stocks, have just the right amount of risk-return ratio.
If you go into lesser risky investment options like treasury bills, you will discover that while they are amazingly safe, they offer unreasonably low returns.
On the other hand, if you are willing to grow money through the real estate market, then you must understand that while the returns can be overwhelming, the risk is too.
If you have a large risk appetite, then only you must look into real estate investing.
So, as we see, stocks do have a near-perfect risk-return ratio.
6. Investing in Stocks is Easier
Investing in stocks is easier when compared to other forms of investments.
In fact, with online trading taking over, handling stocks has never been simpler.
With just a few clicks here and there, even a layman can fruitfully invest in the stock market.
7. Liquid Funds
Investing in the stock market has another added benefit of liquidity.
Stocks are frequently referred to as liquid investments, which imply that they can be converted into hard cash very quickly.
For example, if you have Rs.10,000 invested in stocks right now, you can immediately sell those if you are in need of cash.
However, if you had a very valuable painting of Rs.10,000, it will take some time before you can find a buyer and sell it.
Hence, many people feel that when they invest in the stock market, they stay in close proximity to their cash.
8. Invest to grow your Retirement Fund
Saving for retirement should be a priority for everyone.
I have probably said it before too many times yet here it is once again:
If you start saving at a young age, you’ll be sitting over a large savings corpus by the time you retire.
Investing will help you grow your money faster, thereby helping you to make your retirement savings larger! Benefits of investing in stocks are unimaginable.
9. Invest in order to diversify your Income
What is diversification?
Well, here I am talking about diversification of income. Diversifying your income means having multiple sources of income.
Having a single source of income is risky. Therefore, it is always favorable to invest money into stocks and thus have a backup income.
Conclusion – Benefits of investing
These 10 points rightly prove why investing in the stock market will be one of the best financial decision you will make.
While investing can give you great profits, it can also lead to great losses. Hence, you must be careful while choosing which stocks to invest in.
I hope this article was helpful and know you are well aware of the Benefits of investing in stocks.
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