16 Mar 2020 by Pradeep U
Is Stock Market Investment Worth It?

Many people have a misconception that stock market investment is only for the rich.  This misconception keeps them away from stock market investments, and instead, they invest in instruments like bank fixed deposits, Public Provident Fund (PPF), gold, real estate, bonds etc.

By doing so, they are essentially losing out on wealth creation because these traditional investments like bank fixed deposits, PPF and bonds offer a very low rate of returns which are too less to beat inflation.

Interest rates on bank deposits are currently at their lowest in current decade. With global economies taking a huge hit due to Coronavirus pandemic, central banks across the world have already declared rate cuts.

RBI too is expected to follow suit in a bid which will further lower the interest rates which currently languish in the range of 5.5 – 6.5%.

Only stock market investment has the power to beat inflation

Click here to view a detailed presentation on why it is important to change one’s perception about stock market investment for wealth creation.

Bank fixed deposits which are generally considered as safe does come with a risk. Not many people are aware that in case a bank goes bust, the maximum amount which a customer can get back in lieu of his fixed deposits is just one lac rupees, irrespective of whatever amount he has invested in the fixed deposit. For example, if a customer has invested five lac rupees in a fixed deposit of XYZ bank, and if the bank goes into bankruptcy, the customer will still get only five lac rupees. This is because bank deposits are insured for a maximum sum of five lac rupees under the Deposit Insurance and Credit Guarantee Corporation (DICGC) norms.

However this sum of five lac rupees is payable only if RBI cancels the banking license of the bank and not if the license is suspended.

If you think gold and real estate are risk-free investments, think again. Gold needs high security in the form of bank lockers to protect it from theft. Renting a bank locker adds to your investment costs as rent is payable every year for bank locker. Besides this, if there is some theft or loss of gold kept in your bank locker, the bank cannot be held responsible for the same.

Real estate took a huge hit post the demonetization in 2016. Many properties are still lying unsold across major cities in India. According to report published by a leading real estate website, the number of unsold homes across 9 top cities in India stood at 7.75 lacs in third quarter of FY20 despite various measures by government and real estate developers

 So in short, currently property is a dead investment. Real estate sector may revive in future, but nobody can predict when.

Stock market investment is risky but rewards are also very high

A major reason why people stay away from the stock market investment is the risk involved. But as we have seen above, there is a risk in any investment.

There is no doubt that stock markets are risky in the short term due to high volatility, but it tends to stabilize over the long term and offer double-digit returns. Only those investments which offer double-digit returns have the power to create wealth. That is why stock market investment is indeed worth it.

To invest in the best investment opportunities currently available in the market click here.

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