Why is it important to grow money?
Well, people never knew the need to grow their money till a pandemic hit them, they got to know that their not only was their job unstable but also their financial status. Robert T Kiyosaki’s “Rich Dad Poor Dad” had a great impact on people too, people got to know to make their money work for them.
So, here comes the question, where to invest ,how much to invest and what are the different sources of investment? This blog post is a breif description of some of the most prominent sources of investment.
FDs or Fixed Deposits is the investment that your parents would have told you as the best form of investment ever, but is it true? Let’s find out.
Fixed Deposits as the name suggests means depositing a fixed amount of money which grows over time at a low interest rate. It is one of the safest forms of investment and is best suited for people with low risk appetite. The flaw in FDs is the low rate of interest, the interest rate is so low that Interest – Inflation gives absolutely nothing away. Take for example India, the average FD interest rate offered by Indian banks are 7-8% whereas the inflation rate in India is estimated to +-6%.
What is inflation? Well in lay man’s terms inflation is the rate at which the price of commodities increase(a detailed explaination of inflation will be provided in future blogs.), similarly, deflation is the rate at which price of commodities decrease.
Stock Market is an organised “market” where shares of companies are purchased and sold. When companies need funds,they issue shares of their company to the general public. Shares, as the name suggests means a share in the company’s profit and losses. Purchasing a share of a company makes you a part owner of the company. (Detailed explaination of how stock market works will be provided in future blogs.)
Is Stock Market a safe source of investment? The answer is, Yes,provided one has knowledge about the market, the companies and its internal and external environments.
FD Vs Stock Market
When it differentiated on the basis of safety, FD is way better than Stock Market. Stock Market always has the risk of crash, the market all over the world has hardly fully recovered after the 2008 crash, which ended up destroying families. (The 2008 crash, also led to the formation of “bitcoin”, which is a different topic altogether) In India, the famous stock market scams are “Harshad Mehta Scam”(to know more, watch “scam 1992” a great webseries on Harshad Mehta) and “Ketan Pareek Scam”. While talking about scams, one should never forget people like “Warren Buffett and Charles Munger” who are considered to be as the gods of investing. (Separate blogposts will be made dedicated to the lives of everyone who have made an impact in the current image of stock market)
On the basis of profit making, Share Market is way ahead of FD, if invested carefully. People end up getting atleast 12-14% return each year if invested in right shares( in some cases way more).
So, where should we invest? The answer is maybe both.
Become a part of the journey of a finance newbie learning everyday and growing his finance skills. 