WHY YOU SHOULD INVEST IN 2020?
You work hard to earn your money. But does your money work hard for you? Investments are needed for precisely this reason; to make your money grow, so that it may adequately provide you a comfortable life and help you to achieve your goals. Here is an overview as to why you should invest in 2020.
Money is an effective tool
Life is fickle. Although we say money cannot ensure ultimate happiness, we cannot deny its a tool we need to manage life well. Considering this, saving a portion of your earnings is simply not enough. How and when you have invested those savings is what sustains your life goals. Hence, investments are defined as savings that are systematically converted into higher returns over a long duration of time. If one invests wisely and timely, one can even retire early and pursue other interests in life, along with having financial stability. If you haven’t so far, here’s why you should invest in 2020.
A tough 2019
It is true that 2019 was a challenging time for investors. Real estate prices reached a plateau, fixed deposits in banks drew meagre interest rates and with only a few large-cap stocks dominating the market, investors just did not gain satisfying returns on their portfolios. However, it should be noted, that the economic scenario notwithstanding, specific flaws at the investor end also contributed to a damp growth in personal wealth.
Generally, very few people are truly conscientious about growing their money. Often, they don’t educate themselves by reading enough about personal finance. Rather than sourcing authentic consultation, they tend to rely on the internet too much, and therefore, lose out to wrong investments via misinformation and biases. For example, clinging to fixed deposits in cooperative banks, despite low interest rates comes from a belief that all banks are safe and have government backing in case of crisis. Instruments such as non-convertible debentures or gold schemes of jewellers are not sufficiently assessed for risk. There also seems to be a lot of confusion about the tax laws, capital gains and income from house property, as well as about filing returns.
Budget 2020 and changing scenario
The year 2020 promises change. India’s economy is set to grow at 7.1% in 2020, as projected by the World Economic Situations and Prospects (WESP)’s 2019 mid-year update. Furthermore, the Indian Government is taking concrete steps to make our country an economic force to reckon with. Start-ups in high growth areas like mobility and e-commerce and other verticals, are creating emerging markets and innovation. Additionally, reforms like liberalised FDI policies, quick solution to corporate disputes, simplified tax structures, and a spike in both public and private expenditure, are creating immense investment potential.
The Association of Mutual Funds in India (AMFI) has targeted growth in assets under management (AUM) to the tune of Rs 95 lakh crore (US$ 1.30 trillion) and a threefold increase in investor accounts to 130 million by the year 2025.
This is the right time for people to bring an attitudinal change towards money management and to chalk out investment plans. Generating wealth should be a personal goal for everyone, both via earning income and through investments into stocks, bonds, mutual funds, exchange-traded funds, and real estate. The responsibility is totally on you to make your money work. Given the current status of the economy, why is it important to invest?
These are the main reasons:
Inflation eats into your salary and savings. Considering this, if you save only in bank accounts, it is self defeating since the interest rate offered there is typically lower or just about equal to the inflation rate. An effective investment plan for mutual funds and stocks offering a better return over time compensates for the inflation rate. Though market risk is involved, the long term mitigates the risks to a large extent.
Building a Financial Corpus
Apart from stocks and mutual funds, when you invest in precious gems, gold, silver and personal or commercial property, you create a corpus of funds to rely on in times of need. Such diversification can bring good returns in many cases. Gold, silver and precious gems can be liquidated almost anytime during need to procure sufficient funds. Properties in prime locations have their values going up always. Fiat money doesn’t have a commodity associated with its value, so investing in precious metals or property gives your money a definitive value as compared to others. When these investments are liquidated, you end up with more than what you had invested.
Investments, if handled well, can generate wealth in a sustained way. For instance, equity options in mutual funds grow your money at a faster rate. Moreover, keeping track of such investments, you may slowly begin staving off the profits and reinvesting them into fixed income assets. The profit thus made is protected and the initial capital investment can grow for a longer duration. This method allows greater return on the investments.
Creating security for retirement
Post retirement financial responsibilities do not go away. Medical expenses and frequent traveling, taking up long pending hobby classes and recreational activities incur quite a few expenses. A timely investment now will ensure a smooth uninterrupted source of income during this phase of life.
Indians want to save and invest more in 2020. YouGov’s latest research reveals that “‘Savings’- either starting to save or increasing current savings is the top financial goal of more than a third of urban Indians (37%) in 2020, both men and women”.
Though investing at any stage of life may be done, but as Warren Buffet says “The best time to invest was yesterday, the next best time is today and the worst time is tomorrow “.
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