Why need
investment?You must be thinking what a foolish question is this? Everyone knows about the need of investment …..but
wait a minute most of these people are misinterpreting the ‘
investment’ with the ‘saving’, for most of them just saving is an investment and here the question arise ‘WHY WE NEED INVESTMENT AND NOT JUST SAVING?’ but have ever thought why we call our bank account a saving account and demat account an investment account .Saving means just keeping a slice of amount aside what you have earned if you will keep it in fixed deposit then you will get some ‘interest’ on it but is you will invest in may be in stock or gold etc. you will get ‘returns’ on it. It is called return because these are not fixed and guaranteed while interest is guaranteed.But the study shows that the proper investment always gives better return than the interest. No doubt the risk is associated with investment which not the case of saving.
Beating the Inflation: Inflation is the major concern when we consider the time value of money inflation means the depreciation in the value of money over a period of time ex. Suppose today we are paying 5$ for 1 kg sugar after 5 years we can not buy the same amount of sugar with 5$, say in a same amount we can buy only 800 gm of sugar. This is known as inflation.Most of the time the savings interest rates doesn’t beat inflation marginally where stock market always beat it. Suppose the inflation rate of a country is 7% per annum and the interest you are getting is 9% per annum then your actual appreciation in capital is only 2% and hence beating the inflation is must if you want to be rich.Increasing life span: As we can see in the whole world because of developments in medical science the average age of human being is increasing hence the non
productive years are also increasing. Just look at the difference below. (Hypothetical example)AgeImportant life stagesTotal Productive yearsTotal non productive years0-18Education-1818-58Job40-58-65Retired life-7AgeImportant life stagesTotal Productive yearsTotal non productive years0-24Education-2424-55Job31-55-72Retired life-17Earlier the non productive years of human being are 25 against the 41 in current scenario and productive years are 40 against today’s 31 years hence to cope up with these years we need proper investment because in thee idle years when we don’t have any other sources of income other than banks interest on your savings which is also eaten up by the inflation you need to have a strategy to beat it.