💲Investing >>> Saving

The imperium of investing over savings and trying to understand the minuscule difference between them.

Why one should stop saving?

Stop Saving. Yeah, you read it right. Stop saving. Let's presume that you save 80% of your income each month and deposit it in a savings account. What do you get out of it? Nothing. The money sits in the bank doing nothing and staying dormant for years. Maybe you get an interest of 3% per annum (maximum), but that 3% won't even beat the average inflation rate of India (~5%)

Let me explain clearly. Hopefully, you were able to save 100 INR in a year in a savings account. You might get a savings interest of 3 INR. So at the end of the year, you would have at 103 INR in your account. But the inflation would have cost you 105 INR. For instance, a coffee would have cost 100 bucks at the start of the year. But, at the end of the year, it would have been increased by 105 bucks. That's because of inflation.

Now it makes sense right? Why save when your savings doesn't even beat inflation? It's like stashing your money under a mattress and a few years later that money is not gonna be valued.

It turns out to be true that your money of 100k INR in 1984 doesn't have the same value and analysts say that it could be valued at just ~5000 INR in 2021 which means that your 100k INR has depreciated by 1900% in 37 years! 😲

Investing vs savings

So what should one do? Invest your money. Investing your money is different from saving. Investing means you put your money in a company or an asset or in any investment portfolio. How is investing so different from savings? If you start saving, your money simply sits in the bank doing nothing. But investing can help your money grow or shrink. Investing can get you higher returns than savings. But at the same time, one should consider in what asset he/she is investing. Is it a growing asset or not? Since a bad investment can drain all of your hard-earned money and there is plenty of cases and history to prove many people lost all of their money by investing.

One type of investing that is highly recommended is Equity market investing where if you play the game of investing correctly and use the power of compounding you might get fruitful returns.

Let us take the same example again. You invest 100 INR in the equity market and fortunately if the market was bullish you might get a good return which I am pretty sure beat the inflation rate. The average yearly return that the Indian equity market is holding right now is ~10% (8% when adjusted for inflation) which is far better than a savings account.

So try to grow your money rather than simply making them dormant under your mattress.

Ideas on investments

• Stock Market

• Corporate Bonds

• Mutual Funds

• NFTs

• Cryptos

• Fixed Deposit and Recurring Deposit (highly not suggested, why?)

• Real Estate

• Gold

• Provident Fund

These are some suggestions and not recommendations. Analyze your risk appetite and start investing heavily and not saving.

I am very glad that many individuals have realized this and have started investing rather than saving. The below report from TOI has highlighted the same.

Image Courtesy: The Times of India