Why Should You Start Investing?

Allow me to start this post with a story of when I started investing some years back, the worst feeling that I got at that time was why did I not start earlier. All I could think of was the precious time that I had lost. I thought I had a genuine reason at that time but in retrospect, no reason was good enough. Since I was just starting out, the mutual funds I chose for investment at that time were definitely not the best and were mediocre choices at best, though I have withdrawn from them now because of an emergency. I still regret having withdrawn from them. More on this in a later post.

Back to the topic of this post, why should you start investing and “make your money work for you “? A very wise investor (maybe Buffet ?) once said if you don’t make your money work for you, you will work till you die. I will give you compelling reasons why you should start investing(outside of FD’s and savings deposits).

Let’s go over some reasons in the form of a Q & A on the possible excuses that you probably might be giving yourself and according to me what the answer to them are.

Q) I don’t have enough money to invest.
A) Any small amount is good enough. It’s the duration of investment that matters a lot. Time lost is money lost. Warren Buffet says never lose money. I would add to it don’t lose time either (Buffet would probably agree).

Q) I don’t know what to invest in / don’t have the time to research what to invest in.
A) This is frankly a very valid point and often leads to analysis paralysis. You keep thinking about what to get and what not to get, at the end only to shove all your savings into a Fixed Deposit/ Savings Deposit (Been There!). Allow me to suggest a better alternative, do a web search for index funds, go through the details and choose an index fund with a Total expense ratio(TER) ~ 0.5%. It’s that simple. Over a longer duration of time (decades), Most index funds at least give a return of 12-13%. I will go into more details on these in a further post.

Q) What’s the worse that can happen if I don’t do anything, it is not like I am losing money.
A) Well, you are. The inflation rate for India in 2019 according to World Bank data cited here was on an average 7.66 %. The interest rates for Fixed Deposits and Savings deposits could never beat this. Considering very optimistic returns in Fixed Deposits of 5% or even 6% and you will still lose money.

Consider the table below comparing the three over a period of 8 years:

Assuming an inflation rate of 5% (which is again optimistic ), 1,000 bucks should become 1,477 at the very minimum to not lose money. If you are wondering, wait 6% Fixed Deposits are beating inflation, think again. 🙂
Did you think the Fixed Deposits will not be taxed? Even with the heaviest taxation possible, Index funds are bound to win this battle hands down.

If this post has piqued your interest, Welcome and stay tuned for more content.

Mandatory Disclosure: Please don’t consider this as investment advice. But use it as a starting point for your own research. It’s your money, please invest responsibly.