If you had a friend that you spoke to the same way you speak to yourself, how long do you think that person would allow you to be your friend?If you had to teach someone one thing, what would you teach?
If you had to teach someone one thing, what would you teach?
Everyone talks about Risk while investing in the stock market; what are the risk associated if you are not Investing in Stock Market or stock market-related products.
This is one thing that I would teach someone or anyone for that matter of fact.
Compound Interest in its true sense is the eighth wonder of the world but it is magnified with investing in stock market. Not taking a risk at all is the biggest risk; you might have taken a risk with your job changing from one to another, risk while investing in property or buying a house, a risk of even lending some money, “Why not the risk of the stock market”.
I am not saying that stock market is not risky, but done right and is listened to the right person to take the right decision in a long-term perspective it can do wonders.
Risk of not Investing in the stock market one of the main is to beat the inflation. Did you know your other returns could be affected by inflation alone?
The Risk of Not Investing
This comparison of the stock market with all other asset classes in short term and long term. For you to understand why so much emphasis is given to the stock market. At the end of the article, you would understand the risk of not investing in stock market and what’s important to you.
Stock Market Has Outperformed All Other Asset Classes
In short-term and very short-term there is no single winner, every month a different asset class is a winner. This conclusion has been arrived after comparing various asset classes such as Cash, Gold, Debt and Equity; for a period of five years 2011-2015. Real estate as an asset class is not included because it could be biased.
There is no single winner every year during this period of time.
From the above, we can conclude that every year it is a different asset class that is performing well over others.
Not getting into more detailed research which was conducted by IIFL for different asset classes such as Glod, Equities, Bank Fixed Deposit, and Property aka real estate for a period ranging from 5 years to 20 years.
All the calculation done here are post-tax which eases you to take a decision on which asset class to invest.
Keeping long-term investment in equities as priority stock market has beaten all other asset classes over a period ranging from 5 years to 20 years.
This is one of the most important reasons for you to invest in stock market.
People consider that investing in gold is safer to invest in stock market. There are chances that even gold underperforms it is only that we do not take into consideration.
What are the chances of Young Investor to lose money over 40 years of Investment? Almost negligible!
Risk in Long Term
In short-term and very short term, it is very tough to predict the stock market.
Majority of people lose over here. If you are going to keep looking at your real estate investment all the time it not going to grow multifold.
Same is the case with an investment in stock market always looking at the price does not give you high returns.
The risk is mitigated in long term. Also, as you have seen in the above research the stock market is performing well only in the long term. Even the best of investors cannot be right in the short term.
To get the best out of stock market, it is not important that you invest lump sum amount in one go, but consistently small amount over a long period of time is the key to success in the stock market.
If you are well worse in the stock market you can use these Fundamental Stock Screener to analyses the stocks you want to invest in. If not you can take the ETF and mutual fund route for investing in stock market. You can start as little as Rs. 500 and with COIN Zerodha brokerage account there is no brokerage in the mutual fund investment.
You can also download the Comparative Chart of Fixed Deposit and Sensex, adjusted for Inflation from 1979-2012
What’s important to you?
Your money should grow over the long term so that you can use it when you required.
One thing that cannot be replaced is the time factor. Why haven’t you learnt the right way to invest a little more all the time.
It’s only matter of time that you understand the Risk of Not Investing in Stock Market.
Take out every word that doesn’t contribute something new.
Come back here and tell us about the before-and-after. I bet you’ll have something to say!
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Also published on Medium.