Why do your need to invest your money?

Last Updated on February 25, 2020

Invest to secure your future and fund dreams

“Wealth is a person’s ability to survive so many number of days forward—or answer to if one stopped working today, how long could the one survive?”

It is obvious to most people why they need to save. We save to,

Provide for a Secure Future: For Health, Children’s Education, Life after retirement, and
Fund Your Dreams: Buy a home or a car, start a business or have a certain lifestyle

Saving a portion of your current earning is absolutely necessary. But is it enough? Inflation erodes value of money – at 6% inflation, 10 years from now, your saving will be able to buy only half of what you can buy today. And, if your FD gives 6% returns after tax, then all you have achieved is to maintain the value of your saving at the same level as today. What your money earns for you makes a big difference to how well you meet your future needs and dreams.

One lac of saving @ 6% will become Rs. 3.2 lacs after 20 years, but will become Rs. 9.6 lacs @ 12% returns. That’s 3 times more, giving you Rs. 6.4 lacs additional buying power beyond inflation. See it in a different way. Suppose you need to have Rs. 5 Cr after 20 years. You will need to have Rs. 1.5 Cr today, if you earn 6% interest per annum. But you need only Rs. 50 lacs, if you earn 12% returns. The effect is equally dramatic when you do an SIP that earns you only 6% versus 12%. In short, earning 12% returns will make many of your future goals possible.

To earn returns above FD or inflation rates requires you to invest.

Investing means making your money work harder for you to generate more money. The objective of investing is to generate good returns that help you beat inflation, and create wealth in the long run. Investing is not a get-rich-quick game, it’s not about making bets or taking chances, it’s not speculating.

In fact, the Rule #1 of Investing is ‘Never lose your money!’ Hence, when investing, we say good returns consistently, & not extraordinary returns once in a while.

View this interesting video to reinforce your understanding on Why should you invest your money?

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