Investment Basics

Why do I need to invest?

For instance, if you have Rs.10,000 in a saving account earning 3 % interest each year, in 20 years time your saving would be worth 18,061, that’s a return of just over 80%. However if inflation is about 7 % Rs 18,061 would only be worth Rs 4.668 in today’s term!

Inflation eats away the value of your money & that’s why saving is not enough. You need to invest to pack power or grow your money manifold.

Sound investing is grounded in an investment plan i.e. based on your personal circumstances. You can put it together on your own or with the help of a financial adviser. A typical plan includes important stages- setting your financial goals, defining your time horizons to achieve them, discovering how much risk you can withstand & in fact, diversifying risk, by investing in a range of investments such as cash, bonds, equities & other assets.

When should one start?.

Sooner you invest money gets more time to grow. The earlier, the better. The sooner you invest the more time your money will have to grow as you benefit from compounding. If you delay you will probably have to invest much more to achieve a similar result.

Here is an example that demonstrates the difference time can make to your saving:

If you started investing Rs. 5000 a month on your 40th birthday, in 20 years time you would have put aside Rs 12 Lacks, growing at an average of 7 % a year, it would be worth Rs 25,25,194 when you reached 60.