Why
You Must Invest In Equity Markets?
While
you will find lot of articles advising the importance of early investing and so
on, but this article is aimed at making everyone with responsibility of a
family and dependents or one who simply want to increase one’s wealth and do
sound financial planning; that investing in stock market is a necessity and not
just an opportunity or option.
Equity
markets are presently a driving force of the businesses, industries and
commerce in its entirety. The reason of it is the capitalist structure of the
world economy and ecology. Whatever government be it socialist, communist,
dictatorship or democratic or mixed; they are following the capitalistic and
free market (more or less in case of dictatorship style) structure of economy
and running the commerce.
I
can write long discussions about the background and how the so much domination
of stock markets came over our world and life. But I will give out only
important overviews here.
The
FD or Fixed Deposit rates; in India if you remember were 15-20% before just a
couple of decades and 10% just before a couple of years. But nowadays it is a
dream only. Just like 20% Fixed Deposit rates disappeared, so will the present
8-9%. The reason is dual. One is the economic cycle and technicalities and
another is the planning of government. Number one, the interest rates have a
tendency to come down over a period of time, just like the non-absolute rate of
return has a tendency to decline over time. Secondly, the government wants to
get rid of paying hefty interest to depositors. It wants a lot of money
management responsibility off its shoulders so that it can decrease the various
deficits and basically create atmosphere of self responsibility and self
dependence which is the essence of the mechanism of capitalism and free
markets.
Understanding this much is sufficient to realize that one must invest in equity markets. Below are some bullet points giving some more supportive arguments to the basic premise explained in above paragraph.
Understanding this much is sufficient to realize that one must invest in equity markets. Below are some bullet points giving some more supportive arguments to the basic premise explained in above paragraph.
·
FD rates are going to
come down only. That is why invest in Stocks.
It is a well known fact and
common knowledge that the stock market/equities, world over, have consistently
given superior return, against bonds, FD, real estate and any other asset, year
over year, both simple and compounding, including the stock exchanges of India.
You may find some chart on our site graphing the comparison between
them.
·
Government has been
regularly promoting investment in stock market by way of Rajiv Gandhi Tax
Benefit Scheme, taxing the interest in fixed interest instruments etc.
·
India is slowly
becoming a capitalist and free market nation and slipping towards materialism
and consumerism like USA and other Western countries. This structure of Economy
is supported by and depends on a financial markets mechanism of which Equity
market is most important pillar.
·
These days you will
see that if stock markets rise or fall 2% or say like 500 points; the
newspapers will highlight it and show it on front page headline. Same is case
with the world markets. If global stock markets fall very much then it becomes
headline of all newspapers. The point is they are the engine of the economy, believe or not and like it or not.
·
Government itself is slowly
putting the money of pension funds etc.into stock markets. It has already
appointed SBI etc fund managers for it. It is well known that India's largest and a government
insurer LIC already invests more than Rs.50,000 crore every year in India stock
markets.
·
You can see
government advertisements promoting investment in mutual funds by AMFI and safe
investing advertisements by NSE and BSE.
·
SEBI, the government
regulatory organization for stock and commodity markets is considered very
powerful organization with hundreds of crores of reserve fund with it.
·
The turnover/daily
volume of Indian stock markets have increased from 1 lakh cr.before 2 years to
now 5-10 lakh crore.
·
There are only about
2 crore demate account out of the 125 cr population of India. Just imagine what
will happen when people will rush to open demat accounts! Same thing with the PAN Card holders and the number of people filing tax return and paying actual tax. The government has launched (2016) massive campaign and thrust to get more people to pay tax so this number could atleast quadruple in coming 2-4 years. What does this mean? This clearly means more people coming to the on-paper money world. This people would invest their money to tax planning. A lot of money 'off record' till now will come in circulation/market. Again, the JanDhan Yojna will bring crores of more persons into banking system and again more off-record money coming into the economic system. FD rates are going to come down only. That is why invest in Stocks.
· Government has been regularly promoting investment in stock market by way of Rajiv Gandhi Tax Benefit Scheme, taxing the interest in fixed interest instruments You get the picture?
· Government has been regularly promoting investment in stock market by way of Rajiv Gandhi Tax Benefit Scheme, taxing the interest in fixed interest instruments You get the picture?
·
The equity markets
have across the globe historically given superior returns absolutely and on an
average also in comparision with the bond, real estate, gold, and other
instruments of investing. Read separate article giving out the specific date
for the same.
·
Basically, the equity
markets/shares represent the growth of the economy and actual business,
commerce and industries of the particular place.
·
Wealthy and smart
educated class has already started financial planning for their retirement and
children and a big chunk of the investment amount is put into stock market
directly or by way of mutual funds by them.
·
The money of
insurance you pay to your insurer also goes into stock market. All the
insurance companies invest in stock markets as per the percentage allocation of
the particular scheme of investment.
·
If you don’t invest
now, your children will have a lower hand in terms of savings when they grow up
and need money for education or marriage out of their ancestral wealth.