We all understand and agree on the need to invest. The question that is oft debated is: where to invest? Should one go with the safe, conventional investment avenues such as bank fixed-deposits, post office saving schemes, PPF etc., or venture out of the comfort zone and dabble in share markets?Investing in the share market has the potential to better returns than those from fixed-return financial instruments.
Let’s see why you should consider investing in share markets.
Potentially high returnsInvesting in share market gives you an opportunity to earn potentially higher returns on your investment. Thus, venturing here gives you a chance to compound your money in the long run and accumulate wealth for various life goals.If you buy shares of a stable company and hold them for a considerable period of time, you can make a quite a fortune for yourself.
Beats effects of inflationInflation is the general rise in the price levels in an economy with time. It eats into the value of your investments and the purchasing power of your money. A food item costing Rs. 100 today may cost Rs. 120 next year.The returns from bank FDs or PPF can hardly beat the effects of inflation. Hence, they cannot effectively combat the effect of inflation. The returns from share market are relatively higher, should you remain invested for the long haul, and help you counter inflation.
DiversificationDiversification is a core mantra of investing. In the share market, there are different types of assets like debt securities, common stock, preference shares, large-cap stocks, mid-cap stocks and small-cap stocks among others where you can invest.You can invest in a range of securities to diversify your risk. So, in case returns from one goes down, the other can balance it out. However, it’s important not to overdiversify as it will not all any real value to your investment.
Simple and flexibleInvesting in the share market is not complex. All you need is a disciplined approach to investing for the longer term and a little bit of research about the businesses you want to invest in. You can do it yourself or take the help of a broker. All you need is a trading and demat account.Similarly, as share market investment do not have any lock-in period, you can buy and sell shares at any time whenever desired. The amount that you invest can be as low as Rs. 100.
So, keeping in mind the higher returns and an ability to beat inflation, share market investments can prove to be a smart decision.
Click here to open a free demat and trading account.
The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.
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