Summary of "1. Why should you invest?"
The video "Why should you invest?" presents foundational financial strategies and market analyses focused on the importance of investing, especially in equities, to grow wealth over time.
Main Financial Strategies and Insights:
- The Power of Saving and Investing:
- The story of Osceola McCarty, a washerwoman who diligently saved money over decades, illustrates the value of consistent saving.
- Simply saving money without investing may not be sufficient for long-term financial security, especially considering inflation and rising expenses.
- Example Scenario of Income, Expenses, and Savings:
- Monthly income: ₹50,000; expenses: ₹30,000; savings: ₹20,000.
- Assumptions: 10% annual salary hike, 8% annual inflation, retirement at age 50 after 20 years.
- If savings are just kept idle (no investment), the corpus after 20 years would be approximately ₹1.8 crores, which would last only about 8 years post-retirement given inflation.
- Impact of Investing Savings at 12% Annual Return:
- Investing the same savings at 12% compounded annually grows the corpus to ₹4.27 crores in 20 years.
- This is about 2.4 times more than just saving, demonstrating the power of compounding and investing.
- Overview of Asset Classes and Their Returns (2009-2021):
- Fixed Income: Government bonds, corporate bonds, fixed deposits; approx. 5% annual returns.
- Equity: Stocks listed on exchanges like NSE and BSE; Nifty index returns around 14% annually.
- Real Estate: Returns vary widely; income from rentals and capital appreciation; difficult to generalize returns due to complexity and high upfront capital.
- Gold: Approx. 9% annual returns; investment through physical gold, ETFs, or sovereign gold bonds.
- Comparison of Corpus Growth Over 12 Years:
- Fixed Income (5%): ₹2.48 crores
- Gold (9%): ₹3.3 crores
- Equities (14%): ₹5.07 crores
- Equities clearly outperform other asset classes over the long term.
- Conclusion:
- Investing, particularly in equities, offers the highest potential returns.
- Understanding the equity ecosystem and how to invest wisely is crucial and will be covered in subsequent videos.
Methodology / Step-by-Step Guide to Financial Planning (Implied):
- Calculate monthly income and expenses.
- Determine monthly savings.
- Factor in expected salary growth and inflation.
- Project corpus growth by either saving or investing at assumed rates.
- Compare outcomes to understand the benefit of investing.
- Explore different asset classes to choose appropriate investment vehicles.
- Prioritize equity investments for higher returns over the long term.
Presenter:
- Pratik Singh, CEO and Founder of Learnup.com
Source:
- Zerodha Varsity video series on investing basics.
Category
Business and Finance
