10 reasons why Millennials should switch from saving to investing in the stock market
Know how investing in the stock market will benefit you
If you are one of the millennials who is thinking of investing some money for the sake of the future. If you think investing in golds, bonds, real estate, fixed deposit is too cliché and are looking for reasons to dive into share market investing., you are in the right place because we have brought you 10 reasons why millennials should invest in the stock market.
If you are a millennial, you probably do not have a lot of responsibility, which means you are either spending all your money or saving it for the future. Saving money is a good idea but growing your money is an even better idea.
Get over the notion that you need lakhs of rupees to invest in the stock market. You can start by investing Rs 1,000, which you normally spend on one movie outing.
Investing in stocks will grow your money
When done right, with enough research and knowledge, you can grow the money you invest by anywhere 7 per cent to 10 per cent per year over the long term. Suppose you invest Rs 10,000 in the stock market today and it gains around 7 per cent per year, you will turn your Rs 10,000 into 20,000 in just 10 years.
Imagine 10 years ago you put Rs 10,000 into an account, invested it in some stocks, made some trades, and now 10 years later you have your original Rs 10,000 plus another Rs 10,000 you made from investing.
Or, imagine a longer-term example where you’re both a smart investor and a good saver. Imagine you invest Rs 10,000 of your savings into the market every year for 30 years.
In total, you will have invested Rs 3,00,000 in stock for 30 years (10,000 per year x 30 years). Now, let’s assume you achieve the same average yearly returns 7 per cent per year.
So you’ve invested a total of Rs 3 lakh over 30 years — but guess how much you have in your account at the end of that 30 years. The Rs 10,000 investment per year would grow into Rs 10,10,730 in 30 years. You invested 3 lakhs and got more than 7 lakhs extra in 30 years.
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Invest in Stocks Because Historically They Have Gone Up
Stocks can see nasty crashes, periods of bad performance and pullbacks. But overall, stocks have formed a steady growth as the Indian economy and the world economies have grown.
Power of Compounding
We have earlier demonstrated power compounding above but to clear your concept, even more, read the following sentence carefully. If you earn a good return on your investments over a long period of time like 30, 40 or 50 years, that investment grows way bigger than seems possible.
Money Sitting in Cash Will Lose Its Value
We all should be aware that money sitting in cash will lose its value as time progresses. Every year inflation rate increases which means that if you are buying milk for Rs 60 per litre today, it will only increase in the future. It won’t drastically come around Rs 20 per litre. It means that slow but steady inflation makes things cost more over time. Your father must have told you the story of watching a movie in just Rs 5. But today, one has to spend at least Rs 200 to watch a movie. This is large because inflation makes the price of services and products go up over time.
If kept in cash, your hard-earned money will slowly lose its value over time.
You would probably make more than other investments in stocks
If we look back at history, stocks have earned more wealth for investors than most other investment options. On average, investors in India have profited more while buying stocks than from investing in gold, real state, bonds or other investment options.
Tax-Free Profits
Government offers several types of tax-free accounts that allow you to legally avoid paying taxes on your investments. Avoiding taxes can make a huge difference in how much money you can earn over a period of time. And the more money you earn and then invest, the greater is a possibility for a positive impact from avoiding taxes.
To Save for Retirement
It is important to have money to live a lavish life after retirement. The government of India is not going to give you pension (because you are millennial and there is no pension after 2004) so money invested in stocks will help you after retirement.
To Own Part of a Company You Love
I am sure you know that you can buy stocks of any company which is listed in the share market. So, you can invest in your favourite company and become a part-owner even if you buy a single share of a company.
Make a Profit from Industries You Know Well
Everyone is an expert in something. So, you are likely to be able to make very smart investment decisions in the area of your expertise. For example – if you work as a doctor and you notice a breakthrough new technology in your field that will take the industry by storm, you might consider buying the stock of that particular company.
You will get to learn a lot
If you are a beginner, you might not know a lot about investing, but investing in stocks will teach you a lot. You would know a lot about share market, and how companies work, how they succeed or fail, how economies impact companies, how products come to market, and much more.
Also, you will learn to think in new ways. Investing in share market requires research, analysis, logic and thoughtful reflection. Practising these skills with investing is sure to sharpen them in other areas of your life as well.
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