BETTING ON ECONOMY IS BETTER THAN SAVING MONEY?
I’ll keep this short and simple. What do I mean by investing in the long term? In this context, I am talking about investing in nifty and Sensex, i.e., stocks. Always remember that no matter what, the next generation always performs better than their previous generation irrespective of wars, natural calamities, unemployment, market crash, or even corona-virus attack. We always get better than our previous generation. So, getting better means the multinational companies of our country always tend to perform better in the long run. The long-run for me is 30 years. So, 30 years from now, the companies that exist today always get better and bigger. You do not need any type of financial education to understand this. So, that’s the base of my argument, that once you invest, forget about your money for the next 30 years.
STOCKS PRICE INCREASES IN THE LONG RUN, NO MATTER WHAT.
Mostly now people will be thinking, what is the guarantee that the company will not close like for example, Kingfisher. No, even worse, what if all the 50 companies in nifty-fifty go bankrupt? There is only one sentence for that question, “if all that money you invested in those 50 companies suddenly close, then also forget about the money you had kept in your bank”. The money kept in your bank will also be gone with that.
My friends, you should know the money you put in the bank is actually given to these huge companies as loans. If tomorrow, you lose all the money you invested in all these companies, then along with you, your other friend who had saved money in the bank (who did not invest money in stock) will also lose his money. So, you need to understand one thing, it is that whenever a multi-national company gets into losses or if it starts losing its customer base for any reason and goes into loss then the government interferes and takes actions to improve its financial stability. It has to because these companies are major contributors to the GDP of our country. Actions like lowering the interest on loans or creating subsidies, etc. Because eventually if the companies close, the citizens of the country are affected the most. If the citizens’ investments are gone, they will lose the trust on the economy and government. To avoid that from happening, the government takes all the measures to save it.
Now that doesn’t mean you can ask for as much help as you want from the government. It’ll try to help the company till some extent and if it doesn’t work, they close the company or they decentralise the company’s powers by breaking it into many more smaller companies.
Once, the company’s financial condition is back to normal, it will keep progressing because as I’ve told you that the future generations always live a better life than their previous generation, that’s what will happen.
So, no matter what, it’s much better to bet on the economy rather than save money in the bank. The interest on your fixed deposits is in percent but the returns on the stock are in times. Eg: The interest on deposit might be 8% per annum but the return on stocks is approximately 15 times or even more in the time span of 30 years.
A perfect example of this topic is saving 50,000 Rs (solely for the purpose of investing in stocks) till the age of 30. Then diversify and invest in the top gaining companies. Till the time you reach your retirement age, i.e. age 60, that 50,000 Rs will be turned into a gold mine of crores of rupees (because in stocks, returns are in times). Or worst case scenario it’ll turn out to be lakhs of rupees close enough to 1 cr. Not assuring you a accurate number but most probably yes, you won’t be disappointed with the returns. (Do the research and try calculations on excel sheet. You’ll won’t be able to believe your eyes if you look at previous 30 years' progress).
My plan of investments are good for small amounts. Now the small amount differ from person to person. Someone who might find investing 50,000 rs out of his/her own hard earned savings might find it harder than someone who has earned money through smart financial planning.
If you are planning on starting young, maybe at the age of 20 or so, don’t ask money from your parents no matter what. Never ask money from your parents. Once you start doing that, you’d never stop investing because it isn’t your money & you wouldn’t know the value of that hard earned money. If you are in a hostel and doing nothing but scrolling through the phone day and night then I’d say get a job. Work in McDonald’s or Starbucks, I don’t care. Get your own money and invest it on your terms. So that when this portfolio grows, you’ll be proud to say it’s your money.
Another thing you need to understand is that, from my point of view, short term trades are just gambling. No assurity, nothing. In long term, atleast you know that next generation will live a better life than us. I mean people do take risks and make money out of it as well but according to me, it’s not worth it. I’d rather put a google reminder for myself for 30 years later, reminding me to sell those shares I bought long back and now I do not have to worry about my medical bills even if I am not in a very good financial situation.
The intention of this article is strictly to make you understand “why it is better to bet on the economy rather than saving money” & this also does not mean that you put your whole savings in the stock market. You must have savings in case of medical emergencies or paying bills through a bank account.
Don’t confuse investing in stocks to investing in mutual funds. Investing in mutual funds is a completely different topic for some other time.
THANK YOU FOR YOUR TIME.
For a deeper understanding of investing,
Read my story CHAKRAVYUH Part 1 https://abhayabhigna.medium.com/chakravyuh-part-one-1bc9cd3187db
CHAKRAVYUH Part 2
https://abhayabhigna.medium.com/chakravyuh-part-two-ad90422e3f41
