Historically, Indians have always been on top of their finances. We have been taught from a very young age to save, live within our means, reuse things and look for the cheapest alternatives.
Investing on the other hand has never been taught or encouraged by Indian parents to their kids. It’s not like we don’t believe in investments, traditionally Indians generally believe in three types of investments:
- Fixed deposits and Recurring deposits
Before the digital age, FDs and RDs were the most convenient form of investments as these were easily available in regional banks, post offices, etc.
Any other investments like mutual funds and stocks required a lot of hassle and heavy paperwork. They were also much riskier for an average financially unaware person.
- Gold
India is the home to the largest privately owned gold. It is estimated that Indian women hold about 11% of the world’s gold reserve. This is primarily due to the status symbol associated with it.
Traditionally, gold has also been the only form of a valuable asset that women were allowed to hold. This coupled with the fact that the price of gold has remained relatively stable over the years made it a sensible investment.
But in order to invest in gold, you need a large sum of money and since it is a physical asset, the chances of it getting stolen or misplaced are high. You also lose a lot of money in making charges for gold jewelry.
- Real estates
Real estate like land and houses have also been a go-to investment for Indians. The problem here is that buying any form of real estate requires a lot of capital and careful planning. It also requires you to get loans, pay EMIs, ensure maintenance of the property, etc. which adds to the expense.
Many people don’t invest in real estate until they are in their 30s or 40s and are financially stable enough to make the commitment.
One of the key things to note here is that back in the day investment in real estate was also done for survival and not for wealth building. Having your own house means that you always have a place to live even when things are not going well.
While these are not bad investments to have, these are very low-risk investments and the returns for these are not enough to combat the inflation rate. They are also not easy to manage and track.
But with Kuvera you can track all your investments with ease. You can track gold, start and track FDs with just your smartphone.
Financial myths that stop people from investing
Investment is risky: This is partially true. All forms of investment involve a certain risk. But saving your money in your bank account is also risky as the value of your money decreases due to inflation.
Also, investments in stocks and mutual funds have lesser risk if you plan to invest long-term. If your investment duration is 10 to 15 years, then short-term changes and fluctuation should not be an issue as they always even out in the long term.
Also, diversification is important in order to minimize the risk. You should allot your money in FDs, mutual funds, digital gold, and stocks proportionately to minimize the risk.
Investment is expensive: This is a clear myth. The minimum amount needed to invest in mutual funds in India is 100 rupees only. Similarly, there is no minimum amount needed to invest in stocks, you can start with 10 rupees only.
Why should you invest?
- The most important reason that any investor or expert will give you is that investment is essential to tackle the inflation rate.
When you invest in FDs, your returns are generally around 4% whereas the inflation rate in India is around 5% to 10%, this means that if you keep saving your money or invest in FDs, then the value of your money is depleting.
- Things have drastically changed in the past few years. Digitalization has removed the hassle of paperwork, cash transactions, and frequent trips to the bank. All forms of investments have become easier than ever with just your smartphones.
- Moreover, the amount needed to start any form of investment has also become very nominal. You can start your mutual funds at just Rs.100. And it has also become very convenient to track or shift your investments as per your need.
- It has become very easy to learn and acquire information about personal finances and investments. Investor education has never been this easy. With a click, you can find out any information that you need.
What happens if you don’t invest?
- If you only save or invest in low-return investments like FDs or high-maintenance investments like real estate you will lose your money in the long term. Because inflation will depreciate the value of your money which is in the form of FDs and savings while regular maintenance charges will eat up your money in real estate.
- If you don’t invest your money now, then you are not planning for a comfortable life after retirement or in times of financial crisis.
- During Covid 19, millions of people lost their jobs, and incurred losses in business, and even people with well-paying jobs were badly affected. The future is unpredictable, so it is our job to prepare for the worst-case scenario and investment is one of the best ways to do it.
- It gives you the financial freedom to make important decisions in life.
Download Kuvera today and start your investment journey.
Frequently asked questions:
How should you invest your money?
As stated before, you should diversify your investment portfolio. Depending on the level of risk you want to undertake, allot your funds in different forms of investments. Stocks are high-risk and high-return investments whereas FDs are low-risk and low-return investments.
Mutual funds are moderate-risk investments with good returns and have become very popular amongst young investors in recent years.
How much return does a mutual fund offer?
A thoroughly thought-after mutual fund can give you a return as high as 12%. They are also tax efficient.
Is it safe to invest in mutual funds?
All investments are prone to a certain degree of risk. The main thing to look out for is whether the AMC ( Asset Management Company ) that you are choosing is trustworthy or not.
Also, SIP ( systematic investment plans) are a much safer way to invest in mutual funds as they balance the risk and ensure a lesser loss.
Interested in how we think about the markets?
Read more: Zen And The Art Of Investing
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