{"id":923,"date":"2020-03-17T18:00:38","date_gmt":"2020-03-17T12:30:38","guid":{"rendered":"https:\/\/blog.tickertape.in\/?p=923"},"modified":"2021-04-06T11:36:09","modified_gmt":"2021-04-06T06:06:09","slug":"why-should-you-prioritise-investing","status":"publish","type":"post","link":"https:\/\/www.tickertape.in\/blog\/why-should-you-prioritise-investing\/","title":{"rendered":"Why should you prioritise investing?"},"content":{"rendered":"\n<p>If you are new to investing, asking \u201cwhy I need to invest\u201d is a rather sensible question, the answer to which is simple. Assume that you\u2019re a 90s kid. Now go down the memory lane and see if you remember the 25 paise and 50 paise coins.&nbsp;<\/p>\n\n\n\n<p>If not anything, the coins could at least buy you a\n\u2018peppermint\u2019 or a random toffee. But what value do the coins have now? Can they\nbuy you anything at all? No! And it\u2019s only been close to 3 decades since then.<\/p>\n\n\n\n<p>That\u2019s the whole point.<\/p>\n\n\n\n<p>Money\u2019s worth today is less than what it was\nyesterday and it more than what it will be tomorrow. The reason: money\ncompounds in value. This cautionary principle of finance is called the \u2018time\nvalue of money\u2019 (TVM).<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_66_1 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title \" >Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.tickertape.in\/blog\/why-should-you-prioritise-investing\/#Interest-give-and-take\" title=\"Interest: give and take\">Interest: give and take<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.tickertape.in\/blog\/why-should-you-prioritise-investing\/#Saving-vs-investing\" title=\"Saving vs investing\">Saving vs investing<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.tickertape.in\/blog\/why-should-you-prioritise-investing\/#What-is-investing\" title=\"What is investing?\">What is investing?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.tickertape.in\/blog\/why-should-you-prioritise-investing\/#What-should-you-know-before-investing\" title=\"What should you know before\ninvesting?\">What should you know before\ninvesting?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.tickertape.in\/blog\/why-should-you-prioritise-investing\/#Investments-carry-zero-to-high-risk\" title=\"Investments carry zero to high risk\">Investments carry zero to high risk<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.tickertape.in\/blog\/why-should-you-prioritise-investing\/#Risk-and-return-are-directly-related-to-each-other\" title=\"Risk and return are directly related to each other\">Risk and return are directly related to each other<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.tickertape.in\/blog\/why-should-you-prioritise-investing\/#Investments-should-be-in-line-with-your-goals\" title=\"Investments should be in line with your goals\">Investments should be in line with your goals<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/www.tickertape.in\/blog\/why-should-you-prioritise-investing\/#Start-investing-early-to-benefit-from-the-power-of-compounding\" title=\"Start investing early to benefit from the power of compounding\">Start investing early to benefit from the power of compounding<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/www.tickertape.in\/blog\/why-should-you-prioritise-investing\/#Consider-tax-benefits-associated-with-the-investment\" title=\"Consider tax benefits associated with the investment\">Consider tax benefits associated with the investment<\/a><\/li><\/ul><\/nav><\/div>\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Interest-give-and-take\"><\/span><strong>Interest: give and take<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>TVM is why lenders charge interest to their\nborrowers: because the sum they lend today is worth more than what they may\nreceive tomorrow. It is also the same principle because of which you receive\ninterest on a savings bank account and why you pay more for a piece of cake\ntoday than you paid a few years ago.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Saving-vs-investing\"><\/span><strong>Saving vs investing<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Given an option of receiving Rs 15,000 today or in 5 years, which would you choose? Without doubt, most of you would go with the first option, which then brings you to the next question: would you save it or spend it?<\/p>\n\n\n\n<p>If you would save Rs 15,000, how would you do it? Store the money in your cupboard or park it in a scheme that offers interest? If you choose to do the first, you are only setting aside the money and not adding to its value. But if you take the second route and invest in a scheme, you can earn interest on the sum and grow it (unless, of course, the scheme is a sham).<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What-is-investing\"><\/span><strong>What is investing?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Investing is an act of allocating money to an asset\nclass with consideration of earning a benefit (return) in the near future. Therefore,\nit is the only way to grow your savings.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What-should-you-know-before-investing\"><\/span><strong>What should you know before\ninvesting?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Investing doesn\u2019t mean to allocate your funds blindly.\nThere are certain rules to consider for your investments to bear fruits.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Investments-carry-zero-to-high-risk\"><\/span><strong>Investments carry zero to high risk<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>No investment is devoid of risks. Depending on the\nasset class you choose, your funds are at more than just one type of risks as\nfollows:<\/p>\n\n\n\n<ol><li><strong>Market risk:<\/strong> the risk that you may not receive the entire principal amount when the investment matures or asset (<a href=\"https:\/\/www.tickertape.in\/blog\/the-golden-behaviour-during-crisis\/\">gold<\/a>, house property) is sold<\/li><li><strong>Liquidity risk:<\/strong> the risk that you may not be able to sell the asset at the prevailing market price at a short notice. Such a type of risk is high in case of real estate and gold<\/li><li><strong>Credit risk:<\/strong> this arises when your borrower is likely to default on repayments and is relevant in the case of bonds and loans<\/li><li><strong>Reinvestment risk:<\/strong> is the chance that you may not enjoy returns at the same <a href=\"https:\/\/www.tickertape.in\/blog\/flat-interest-rate-vs-reducing-balance-interest-rate\/\">interest rate<\/a> on reinvesting your maturity proceeds. This risk may arise in case of bonds and fixed deposits<\/li><li><strong><a href=\"https:\/\/www.tickertape.in\/blog\/volatility\/\">Volatility<\/a> risk:<\/strong> this is when an asset class doesn\u2019t guarantee returns due to various economic factors. <a href=\"https:\/\/www.tickertape.in\/blog\/what-is-equity\/\">Equity<\/a> is the best example of investments with high volatility<\/li><\/ol>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Risk-and-return-are-directly-related-to-each-other\"><\/span><strong>Risk and return are directly related<\/strong> to each other<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>As a thumb rule, high risk translates into high\nreturns. While some instruments such as a fixed deposit are known to offer\nguaranteed returns, there are others like equities that are highly risky and\nmay not yield any returns. However, historically, stocks are known to have generated\nthe highest returns over the long-term. Fixed deposits and bonds, on the other\nhand, are low-risk vehicles that offer lower returns compared to equities.<\/p>\n\n\n\n<p>The takeaway here is that if you want to chase high\nreturns, you necessarily have to assume high risks. But genius is not in taking\nhigh risks with an expectation of earning high returns. Instead, it is in\ntaking calculated risks, which you can stomach without forgoing the principal.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Investments-should-be-in-line-with-your-goals\"><\/span><strong>Investments should be in line with your goals<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Investing without an objective is like driving\nwithout direction. You will go on investing but not have a clear idea of why\nyou are doing so. Therefore, before investing, ask yourself what is your purpose\nof investing. Do you want to buy a home or a car, fund your children\u2019s\neducation or save for your retirement?<\/p>\n\n\n\n<p>Once you establish an investment objective, you\u2019ll\nknow how much you have to invest. You\u2019ll know the quantum of returns you need\nto achieve your goal. Besides, you\u2019ll also have an idea of how long you would\nwant to stay invested to accumulate your desired amount.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Start-investing-early-to-benefit-from-the-power-of-compounding\"><\/span><strong>Start investing early to benefit from the power of compounding<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Many people, especially those who are young, ask \u201cWhy invest today and not after a few years. The answer to this question is very simple: money gets compounded over time. When you are young and early in career, you have fewer responsibilities, thanks to which you can save and invest more.<\/p>\n\n\n\n<p>Let us say that you are aged 25 and want to accumulate a nest egg for your retirement. Considering you want to retire at the age of 50, you have 25 years in hand to invest. If you postpone investing to, say, 30. You\u2019ll only have 15 years left to invest. Here, the effect of compound interest wouldn\u2019t be as significant as in the case of the first scenario. So, the sooner you invest, the more time your money gets to multiply. There, hope you got the answer to \u201cwhy invest today\u201d!<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Consider-tax-benefits-associated-with-the-investment\"><\/span><strong>Consider tax benefits associated with the investment<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>In a bid to encourage you to save and invest, the\ngovernment offers several tax benefits and deductions under various sections of\nthe <a href=\"https:\/\/www.tickertape.in\/blog\/what-is-income-tax\/\">Income Tax<\/a> Act. For instance, Section 80C and 80D allow you to claim tax\ndeductions when you make eligible investments and expenses. Besides, the\ngovernment, from time to time, also announces additional tax benefits as and\nwhen they think fit.<\/p>\n\n\n\n<p>Given such lucrative opportunities to save tax, make a smart move by choosing investments that help you save and earn attractive returns. But be mindful when choosing an instrument. It shouldn\u2019t happen that in a bid to save tax, you end up investing in a tax-saving instrument that doesn\u2019t meet your risk profile and\/or return expectation.<\/p>\n\n\n\n<p>Folks, we hope to have given not one or two but\nseveral good-enough reasons to help you get started. Remember, your money will\nonly grow if you actively put in efforts. Nothing comes easy, not even money! <\/p>\n","protected":false},"excerpt":{"rendered":"<p>Read why you should invest and the various principles relating to investments<\/p>\n","protected":false},"author":27,"featured_media":975,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"_lmt_disableupdate":"","_lmt_disable":"","footnotes":""},"categories":[8,1722],"tags":[],"acf":[],"modified_by":"Manonmayi","jetpack_featured_media_url":"https:\/\/www.tickertape.in\/blog\/wp-content\/uploads\/2020\/03\/Priorities-investing-1.png?wsr","_links":{"self":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts\/923"}],"collection":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/users\/27"}],"replies":[{"embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/comments?post=923"}],"version-history":[{"count":3,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts\/923\/revisions"}],"predecessor-version":[{"id":931,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts\/923\/revisions\/931"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/media\/975"}],"wp:attachment":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/media?parent=923"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/categories?post=923"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/tags?post=923"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}