First, we need to know the difference between savings and investment, then its
benefits will be known in the future. Inhale as soon as the air comes in.
In article's
First let's have a brief look at savings, investment
storage; Money set aside for your needs. It will remain the same. It does
not grow. For example, money stored in a safe deposit box at home alone.
investment; When you need it, the money saved is kept somewhere else instead
of just being kept. Because money doesn't stay the same in that other place.
is growing There are various examples of that other place; Bank Savings
Account (This also has an interest rate. Money grows.), Bank Fixed Deposit,
Employee Provident Fund, Public Provident Fund, Post Office Savings Schemes
(Post office Saving schemes, National Savings Scheme, Kisan Vikas Patra
etc., Ancient Painting, Ancient Artifact, Chartered Land, Built House,
Mutual Fund Schemes, Stock Market Shares)
Let us see the difference between the two with an example.
Not investing, just saving;
A mother in the year 1979, Rs. Suppose he deposits 10,000 in a safe deposit
box. Now, it is worth Rs. 10,000 only.
Investment in gold;
If he had invested the same money in gold, if it had been invested in gold
in 1979, the price of 10 grams of gold would have been (Rs. 937). For 10000
rupees, you can buy almost 10.67 grams of gold. Today's gold price (Jan 19,
2023), 10 grams of gold costs Rs 55,500. That is, it has increased by 45.00
times. So, 10000 x 45,00 = Rs. 4,50,000/- would have increased.
Investing in stock market index based mutual funds;
If the same money had been invested in an index based mutual fund, it would
have multiplied by 364.81 times (today's stock index; 63,384). So, 10000 x
63,384 = Rs. 633,840000/- would have increased.
Every investment has its drawbacks;
Every investment has pros and cons. In every investment three elements of
risk, liquidity and rate of growth vary from investment to investment. For
someone new to investing, read my advice in the following post.
Impact of Inflation;
Thus, money has no chance of multiplying if it is not invested in any way.
In an inflationary society, if no investment is made, the same standard of
living cannot be maintained. Today, we cannot live the standard of living we
had in 1979 on Rs 10,000. A house can be bought for Rs 10,000 that day.
Today, we can pay only one month's rent.
warning; There is also the risk of losing money in investments. Be very
careful.
As Warren Buffett said,The first rule; Never lose moneyThe second rule; Never forget the first rule.
Therefore, investment is very necessary. Let's start early and harness the
power of compound interest to grow money and make retirement a comfortable
one.