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Stock Market Why The Need to Invest?
[br] To keep up with the rising expense of living, you’ll need to invest your money. [br] Before we get into the answer to the preceding question, let’s look at what happens if you don’t invest.
Example of person without investments:
Assume you earn Rs.50,000/- per month and spend Rs.30,000/- on your living expenses, which include accommodation, food, transportation, shopping, medical care, and so on. Your monthly surplus is the sum of Rs.20,000/-. Let us overlook the impact of personal income tax in this topic for the sake of simplicity. [br] Let us make a few simple assumptions to illustrate our thesis. [br] Every year, your boss is generous enough to grant you a 10% raise in pay. Year on year, the cost of living is expected to rise by 8%.
You’re 30 years old and intend to retire at the age of 50. This gives you another 20 years to make money.
You have no intention of working after you retire. Your expenses are set and you don’t anticipate any further costs. The remaining cash balance of Rs.20,000/- per month is kept in hard currency. [br] Here’s how the cash balance will look in 20 years based on these predictions. [br] Years of Earnings Annual Expense Total Income 17,890,693 (cash retained) Here’s how the cash balance will look in 20 years based on these predictions. If you look at these figures closely, you’ll see that you’re in a dangerous scenario. From the above calculations in 20 years, a few things stand out. Rs.1.7Cr Total
Your lifestyle hasn’t changed over the years because your expenses haven’t changed, and you’ve probably even suppressed your longtime ambitions? A nicer house, a nicer automobile, trips, and so on. If your expenses continue to climb at 8% after you retire, Rs.1.7 crores should be enough to see you through about 8 years of post-retirement living. From the eighth year onwards, you’ll be in a tight place with no funds to fall back on. What would you do if you ran out of money after eight years? How do you make a living? Is there a method to make sure you get a bigger payout at the end of 20 years?
Example of person with investment plans with 12% returns:
Consider another scenario in which, rather of keeping the cash idle, you decide to invest it in an investment choice that increases at a rate of, say, 12% per year. What about, for instance? You kept Rs.240,000 in the first year, which when invested at 12% per year for 20 years returns Rs.2,067,063/- at the end of the 20th year. Years of Earnings Annual Expense Retained cash invested at a rate of 12% Total cash after 20 years 4,26,95,771 Your cash balance has greatly increased as a result of your decision to invest the spare funds. The cash balance has increased from Rs.1.7 crores to Rs.4.26 crores. This is more than 2.4 times the usual quantity.