Today I am writing about the basic motivation behind investing. I know a lot of you must be thinking why you should invest as you can live happily by just getting a MBA degree and a safe job. Well the problem with this notion of a so called “Safe Job” is that it is not safe anymore. As we all must have read that inflation is an ever increasing beast and like it or not it is not likely to go down. The cost of living has been ever increasing and at one point it will reach such a level that your salary will not be able to buy you the basic luxuries that you previously enjoyed, this is the bitter truth.
Instead of having money in the bank, it is better if we put it to good use, here is where investing comes in. There are multiple sectors for investing; we can invest in almost anything. For example a fundamental and basic investment is considered to be education. An innovative example of an investment would be buying a car. Now you would be wondering that how is car an investment, well let’s say you own a company and you travel a lot then the car would help you save time and you could use this time productively elsewhere.
Talking strictly in financial terms an investment would be buying of an asset. An asset can be defined as something that either gives you monthly income or something that grows in value over time and gives you returns.
Liabilities are the opposite of asset’s they consume resources and do not give you a monetary return. The differentiating line between assets and liabilities is thin. In the example of a car mentioned above we can very well treat the same car as a liability because it eats money in the form of petrol.
You would be now be wondering, how the car can be an asset as well as a liability. Well if the car is a Maruti 800 then it is an asset and if it is a Mercedes then it’s a liability (A Maruti serves the basic purpose of travelling fast while a Mercedes costs more money because of luxury and better brand name).
The most common sectors of investing are the following
1. Real Estate
2. Gold
3. The Stock Market
In the coming posts I will be talking about investing in the Stock Market and I will use the Indian Stock Exchanges BSE and NSE to cite examples.