Usually, it is seen that young people desist from investing, especially for long term. On the contrary, they should start investing when they are young because, if money is kept invested for a longer time it gets more time to grow.
The basic idea of investment is to put your money to work for you. One should choose his investment mode or method in such a way that it gives best returns possible over a period of time, say a year or five years or 10 years or more. All investment do rise or fall over a short period of time. That is there is up and down periods in each investment.
Saving is to set aside a portion of your present earnings for future use and investing is to use that saving, in such a way that it grows over a period of time so as to beat inflation.
Many young people avoid investing in stocks (equity) for a long period. They only say that they are still young and have a lot of time on hand for investing. They don’t understand the value of early investing and compounding. If they start early even with a small amount, investing regularly, over a period of time will become huge corpus. They have long working life, approximately 35 years or so, for their investment to grow.
- Equity has more potential for growth
It is seen that equity (stocks) have earned more than other saving instruments available over a long period of time and that too consistently despite its up and downs in short term. Let us see how much return one will get in different avenues that one can invest in.
- Savings in banks: 4–6% per year (unable to beat inflation)
- Fixed Deposit: 6–8% per year (nearly at par with inflation)
- Mutual funds: 10–15% per year (able to beat inflation with good margin)
- Stock Market: 12–18% per year (able to beat inflation with very good margin)
One can clearly see stocks have the highest potential to beat inflation. Inflation is about 5 to 7% per year. You can make money in Indian stock market.
- Do not worry if stock dips or rises
Everyone knows that share prices rise and fall. But in long run, they rise. One cannot lose or gain until one sells or purchases. So if you are having the share and share prices are down, simply don’t sell your script. Or if share prices are high don’t purchase them. Higher or lower value is when you are selling/purchasing it. Not if you are holding it. While holding is only on paper (now a day’s only in electronic form with your DP) it does not matter.
Stock markets are cyclic. So you can hold on to them until your price requirements are met. Once high sell, and then you can again purchase when low. Same company, the same number of shares and at a lower price.
The graph depicts Indian stock market overview of nearly 3 and a half decade.
- Mix and match your investment portfolio
One should have a good mix and match of investments. Stocks should also be a part of your long-term investments. The mix of investment depends on your financial situation, your risk taking appetite, your age and time period for which you wish to stay invested.
You can get stock market investment tips from the internet and other sources, regarding how to purchase, which stocks to purchase and when to purchase them, for a long-term wealth building from stocks.