why is it necessary to invest money? You can save money with you. You have earned money, whether you are doing job or doing business, you have also got pocket money from somewhere, so you can keep that money in your pocket. What happens is that you must have heard in the news, you must have read articles that inflation is increasing a lot. US inflation is increasing; India’s inflation is increasing. Inflation means inflation. Inflationism a kind of delay that eats your money.
Why does this happen? There are many reasons. One of the easiest reasons to understand is that our government prints notes continuously. Suppose in rotation, now understand an example that everyone had 100 people here and 100 people had 2000 notes. So when 100 people had 2000 notes, they could go and buy one thing for 2000 rupees. Consider that there is a beautiful box and everyone can go to buy one box for 2000 rupees. Now what the government did, these 100 people said that you had 2000 rupees, I will give you 2000 rupees more, that is, the money has doubled.
Now when the money has doubled and the box is limited, then the demand for this box will increase. So the box that used Tobe 2000 rupees, because here the government has printed double notes, then the inflation will also double. You will get 2000 rupees and 4000 rupees if people want this box. Simple concept. So this inflation increases continuously. The government prints note continuously and because it prints notes continuously, your money is always less. For this money not to be less, for this, your bank, most people open savings account in which you get an interest rate. Generally, the banks in today’s date are giving interest rates from 3 to 6%.
Now you have to understand this, first see your bank, which one is giving how much interest rate. I am telling you a note today, it will be remembered for a lifetime. The interest rate that the bank is giving, and you see which bank is giving the highest rate of interest, inflation will be increasing at a much faster rate than that. This means that if a bank in India gives you an annual interest of 6% on your money, then the inflation will not be 6%, it will be increasing by 10% or 8%, that is, inflation will be increasing at a much faster rate than that.
So if this money is lying in your bank and you are getting3 to 6% interest in India and inflation will increase, then your money value will be reduced. Now what people do is that a little more than saving rate of interest is found in FD. Sotheby think that we put money in FD. What happens in FD, you cannot use your money, but you will get interest on it, which is generally more than the rate of interest of the savings account. Now you understand the concept of inflation, you understand that if your money is lying with you, then it will be reduced.
So now you understand that people either keep money in savings accounts or keep money in FD. When people start understanding inflation, then what they do is that they invest the money because our values decreasing. So what can we do, we have many options. One option is that youkan invest money in mutual funds. Now the government has started promoting mutual funds that mutual funds are right. Now what does it mean that it is right that you invest money in mutual funds, then what you are doing is that your money can be invested in many ways. It can be invested in the stock market.
When money is invested in the stock market and your money is mostly in the stock market in mutual funds, then it is called equity mutual funds. That money is invested in equity and the government also brings bonds, in which you get a fixed rate of interest, which is more than FD. So you can also call them debt mutual funds, that money is invested in bonds or money is invested in debt. So you have the option that you can invest money in mutual funds. You have the option that when you invest money in mutual funds, then you can do SIP.
What does SIP mean? Systematic Investment Planning SIP and you can also down, Systematic Withdrawal Plan. There are many such plans. There is also a systematic transfer plan. So you can choose the plan you want, but as soon as you come into mutual funds, there was no risk on the saving account. Your risk was not on the saving account; it was not on the FD. Risk is very low in debt mutual funds, but when you invest money in the stock market, then people say that there is a risk here and definitely. So if you want to invest money, then you have to understand one more thing.
Every financial advisor will focus on this thing that what are your goals. Tell me your goals. Goals mean that I want to add 10,000 rupees every month or I want to add 1000 rupees, but the money I want to add is that after some time I want to get my daughter married or I want to buy a new car or I want to buy a new house. So I should get some interest on my money, so that my money increases. Now you know the power of compounding. There is a simple formula in compounding that the more time you invest and the more rate of interest you get, the more your money will grow.
You can simply write compounding calculators on the internet. Write SIP calculator that if you add 10,000 rupees every month, depending on how much rate of interest you are getting and how much time you invest, how much money you will get, you will get to know. Now, our goals should be very clear. If your goal is furlong term, then we have definitely said mutual funds, you can invest money in mutual funds. If you have knowledge yourself, then you can directly be investing the stock market.
For example, you simply have to open a Demit account and through Demit account you can invest in the stock market and if you want to invest in mutual funds, then Demit accounts offer you that you can invest in mutual funds. sFor example, you can open your Demit account with ICICI Direct, you can open your Demas account with Upson, you can open your Demit account with Angel1.These are India’s leading brokers, Now, you are directly investing in the stock market. Remember, there is a risk.
Why is there a risk? Because you may have put 1 lakh rupees today and the market corrected yesterday. You will see that your money is 90,000 rupees or you have a loss of 10,000. This 10,000 loss does not happen. This loss of 10,000is on your papers. Unpapers means that if you have bought shares, bought stocks, then when you sell those stocks, then you will have a loss. Now what happens, what is the benefit of SIP? You are investing every month. Some months the market was up, some months it was down, some months it was up, some months it was down.
So, according to every month, your average investment was there. So, if you look at it according to some years, then your investment, when the market was on a bull run, then also there was an investment, then also there was an investment, then also there was an investment. So, the overall market return that it gives, for example, Nifty 50, you invest money according to index funds, so Nifty 50 has been continuously giving more returns in the last few years.
But if you look at the average, then it is giving around 15% returns. Now, 15% returns are very good according to compounding. This means that if you put an average of 1 year, if you had put 1lakh rupees, then after 1year it became 1 lakh 15000 rupees. Similarly, every year, if we talk according to compounding, then you will not get 15% at 1 lakh, you will get 15% at 1lakh 15000. So, this way compounding grows. You understand one thing that because of inflation, your money was running out, you have to invest. What is the second reason? The first reason was inflation.
The second biggest reason is that we have to put a habit. Itis very important to put this habit because most people earn money, but they spend it. When you put a habit of investing, this habit makes you rich. It is your habit that if you get money, you did not let it go, you invested it. So investment should be a habit. Now many people ask questions that if we have 1000, 2000, 500 rupees in starting, or 10,000rupees, there is a very small amount, then where to invest. I have told you the habit of investing in the stock market, but you have other options. You can also invest in gold. Gold investment is good investment. It protects you from inflation.
We talked about inflation, so the more inflation increases, the more gold rate increases. You can see that goldish always high, its prices always high. It falls down for a while, then it increases. Why does this happen? And if there is something in the market that there is a correction in the market, then the price of gold increases more. So when people come in a situation offer, if there is a war-like situation, then first of all the rate of gold increases. Now when the situation of lockdown happened, at that time, the price of gold immediately went up.
Because whenever there is a fear in the market, people take out their money from everywhere and put it in gold. So gold protects you from inflation, but it will not make you very rich. If you have more capital, now we will talk about it, if you have less capital, we were talking about 1000,2000, 5000, so we said invest money. But keep one thing in mind that if you are investing in real estate, then you typically money, but if you have more capital, you can choose real estate, invest in land. Now someone will say that I live in Mumbai, I have very little land. You think if you had land in Mumbai, what would be the price of it?
It would be too much. You are planning an investment anywhere, you invest in land and for real estate, I say a very good thing, you will remember that you can make notes. The most important thing in real estate is that you invest in land, not in flats, because flats are like cars, they get old and when they get old, you know that you will not get its value because there will be some new builder, some new project will be coming in which he will give more amenities.
So why should someone buy the flat you bought 10 years ago? He will keep applying lipstick powder on it, he will keep renovating it, his money will keep getting spent. New things are more attractive for people, so if you invest in land, there is no depreciation unit and the second biggest thing is that when you have more money, you can invest in real-estate and I was telling you that you can make golden notes, it is my golden rule that whenever you invest in real estate, look at one thing, location, location and location, the location should be very good. The price of that real estate always increases, its location is good.
Maybe your investment is also increasing, but the returns will also be more on it. Now you have to take care of one more thing, I said that the blog can bear little long, but I want to give you a lot of knowledge in one blog. If you want to start investing, again I will talk about it that if you have less money, then where do you want to invest, but you have to ask yourself three things and you will also write their answer below. First of all, if you want to invest, then why do you want to invest? Why?
One thing you will understand that due to inflation, the second thing you will understand that due to the habit, the third thing is what is your reason, what is your goal, why? So you have to write that goal. So this happened, why do I want to invest? Second, if you want to invest, then before that, if you feel like investing anywhere, if someone tells you to invest, then you have to ask yourself a question, where not to invest? You have to invest; you will invest only when you have money left. If you invest in the wrong place, then your money will go.
Many people will pitch you schemes, you will have got the bank and they will pitch you a scheme. Where you don’t want to invest, a mistake many people make, they take endowment plans. Now what are endowment plans? I will tell you that too. Endowment plans mean that you are taking a kind of insurance or people invest in ULIP, so ULIP means unit linked insurance plans. So why am I refusing ULIP and endowment plans? First of all, when you invest, then the agent who is recommending you will get a commission of 30-35% at the start, which is not bad.
That person is working hard, but itis bad for you. If you had invested1 lakh, then your 30,000 was already cut. So how much did you invest? You can understand yourself. So you invested 70,000-65,000. After that, as long as your endowment planer ULIP will run, the person who recommended it, the bank recommended it, then the bank will earn money. Now what happens in this is that in the endowment plan, there is your insurance that if you die, you will get money.
If you die, then take a term plan. Term plan increases very cheaply from endowment plans and the second thingies that you are getting an investment in it. So again, if you have to invest, then why give a commission to anyone? You invest in mutual funds, start SIP, then if you look at the return of SIP, then you will get more than the endowment plan and the second thing is insurance. If you are taking it, then take it separately. It will increase cheaply in term insurance.
So where not to invest, there is no benefit in ULIP. There is no special benefit in endowment plans. So don’t invest in them. The ones who are selling you are more profitable. The companies that are selling you are more profitable. So you have to ask yourself this question before investing any money. I am investing money somewhere, where should I not invest money? If I don’t invest money here, it will work. If someone tells you to buy real estate tomorrow, then what will be the loss if I do not buy real estate and you compare, if buy it, what will be the benefit?
And finally, our question was where to invest? So in where to invest, remember one thing, this is the rule that when you ask yourself where to invest money, then two things will come, returns and risk. Everyone’s risk appetite is different. If I tell you that you need money next month and you have one lakh rupees and you need one lakh and I say you invest it, it can be two lakhs of one lakh, but it can also be zero. The returns are 100% and the risk is also 100%. But if you need it next month, what will you do? I will not do it at all. Why not do it because need it next month.
So in this case, you do not have a risk appetite. What you have to remember here is that whenever you invest money, there will be returns and there will be risk. You have to see that if you are getting a good return, suppose you invest somewhere and you get a return of 20%, then what is the risk in that? If my risk is that my 100% money will go away or the risk is that the money will go away, then should I take that risk for 20%? So you always have to see the risk. As I gave an example in the starting, suppose100% is a hypothetical, it does not happen. Suppose you invest money in the stock market directly, but you do not have a risk appetite at all. So I will say in the starting that you do not invest money.
Why not invest? Because risk is definitely involved here. Returns may be that in a month you have invested in a stock, you get a return of 30%, but it may be that the stock may break. So what is your risk appetite? But if you are investing in blue chip companies, then there may be a return of 10%, 10% may break, but if you have a vision for the long-term. The third thing to see is that when you are investing, what is the vision? I asked you in the starting that why are you doing it? So your goal and your vision, if you have vision in the long term, 5 years, 10 years, then I am giving you a formula again.
Find 10 good companies, find 10 good companies and you can use this formula in it. In which have to invest, in which I do not have to invest, So there are many things in it and I have told you that you have to see the PE ratio of the company. I will keep the complete fundamental analysis in short because if I talk about it, the blog will be long. So you see the whole playlist, you will understand what to see, how to do analysis, what to see after that, and how to invest. So the rule is to choose 10 good companies and invest in it and keep your vision of at least 10 years.
You will definitely get benefit and for your habit of investment, you can choose SIP. So if you do not want to choose 10 companies, then you choose a mutual fund and invest in it for 10 years and youkan trust more on equity because if you trust India’s growth story, then your money is going to increase. You think that companies will grow in India and the market will be flourishing the coming time, then you are going to do very well. Finally, this is what you are doing with investments.
One more thing I would like to tell you, you invest money because it will increase, but do you invest on your skills? This is a very important question and when we talk about investment on skills, there are two types of investment. One is the investment of time and the others the investment of money. Now I will clear this concept. Itis not necessary that I have to grow my skills, so I have to invest money and time for it. You have to take out time.