Investing Introduction – Why should we Invest? Where to Invest? & How to Invest?
Why Should We Invest?
The reason why one invests in various assets such as Equity, Commodity, Real-Estate, and others is to make money. Right?
The Ultimate goal is to make money!
And then there are some specific goals. Such as Early Retirement, Own Home, Car, Jewelleries, Marriage, and Education Expenses. So, the need for money is huge. And, by investing, we can earn that extra money that helps us reach our goals.
But, there is one other reason for which each and every individual must & should invest.
It is called Inflation! CLICK HERE!
Inflation is nothing but excess money supply by the Central Bank. Now, how inflation affects is that it eats away your savings and purchasing power. Meaning, suppose you have 50 lakh rupees saved in your bank hoping for early retirement.
With inflation, we can easily hope that your savings worth 50 lakh will turn out to be worth a little around 30 lakh by the end of 10 years. It’s not that your 50 lakh is turning into 30 lakh!
It’s just the purchasing power of the savings you have saved in your bank has been reduced due to excess money supply. So, what you can but now with 30 lakh, you’ll be able to buy the same by spending 50 lakh by the end of 10 years. Obviously, inflation affects each asset and each expense in a unique manner. For more information about “Inflation”, check this video.
With that said, I would highly recommend each and every individual watch this video (attached below). Do not deposit all of your life savings in Bank FD and such. Obviously, your financial condition matters when taking such a decision. But, do consider Investing.
So, we know that we need to invest. But…
Where to Invest?
Basically, there are 4 major asset classes where retail investors like you and I can invest.
- Fixed Income Instruments – I have made a detailed video on this topic. Do check it out! You can also read about the same on my website. CLICK HERE!
- Real-Estate – This is a no-brainer. Each and every one of us knows the importance of owning a house. And, with a population of over 140 crores, the demand for housing is ever-present! But, just know this, when it comes to real estate investing, only 3 things matter! It’s Locations, location, and yeah! Location.
- Commodities – Mainly Precious metals such as Gold & Silver. Did you know that around 65% of Indian household wealth is in Real Estate & Precious metals? Well, this ratio is changing because our next asset class is gaining popularity amongst Indians.
- Equity – I consider this as one of the best asset class to invest in. And, in this series “Stock Market Basics”, all I gonna talk about is Investing in Equities. So, be sure to subscribe to the channel and click on the bell icon to get notifications.
Now we know Why to Invest and where to Invest:
Well, if you are still not sure of either of the question, just stick with this playlist, will explain it in detail in my upcoming videos.
How to Invest?
Since the introduction is done, in the coming videos, will explain What is Stock Market, Various participants, SEBI Regulations, Depository participants such as Zerodha, Upstox, etc, NSDL & CDSL, And then will explain, Fundamental, Technical side of Investing. All directing towards one major topic that is “How to Invest”.
Basically, a lot many concepts under this series of videos in one playlist. Be sure to subscribe and like this video. We’ll meet in our next video.
A brief note on Depository & Participants, SEBI, and Broad Market Index:
What is Depository?
Depositories are like Bank wallets for your Securities. Meaning, that if you buy shares from any Demat account, these depositories will have them safeguarded in your name.
Your Demat account such as Zerodha, Upstox, etc does not have your shares. They just show them to you as they are shown by your depositories.
Depositories store all of your financial assets, including electronic or Demat versions of your stocks, bonds, mutual funds, exchange-traded funds (ETFs), certificates of deposit, etc.
Basically, there are 2 Depositories in India,
- National Securities Depository Limited (NSDL)
- Central Depository Services India Limited (CDSL)
What are Depository Participants?
These Depositories have their own registered depository participants, or DPs, just like banks have their own branches. They serve as the depositories’ agents.
Zerodha, Upstox, or any other Demat Service provider are called depository participants. And, With the help of these DPs, you can buy and sell securities.
Thanks to discount brokerage such as Zerodha, Upstox, and others, each and every Individual can easily buy and sell Shares in the Indian Stock Market with ease. And, that is the reason many young Indians are coming into the stock market.
Whether it is NSDL or CDSL, doesn’t matter to us. All you need to know is that you need a Demat account to trade or invest in Indian Equities.
Check the link attached below to open your Demat account.
Zerodha Review 2022: Everything you need to know! – CLICK HERE!
Upstox Review 2022: Everything you need to know! – CLICK HERE!
Moving on, Now, you know what are Depositories and their participants.
What are Nifty 50 and Sensex 30?
We call it Broad Market or Indices.
There are many indices in Indian Market but the two prominent ones are “Nifty 50” and “Sensex30”.
The 50 largest Indian firms listed on the National Stock Exchange make up the benchmark NIFTY 50 index, which measures the performance of the Indian stock market. It is one of India’s two primary stock indices, along with the BSE SENSEX.
Sensex includes India’s 30 largest companies listed on the Bombay Stock Exchange.
These two indices guide the market sentiment. So, when someone says “Market is falling”, it’s pretty much these two indices are falling and vice-versa. Such is their influence. Because they house some of the finest Companies to ever rule the Indian market. It includes names such as Reliance Industry, HDFC Twin, Infosys, TCS, Bharti Airtel, etc.
What is SEBI?
So basically, the stock market is a place where you buy and sell shares listed on the Indian Stock Market. That makes sense right?
Well, if it doesn’t then we have SEBI to look after. SEBI stands for “Securities and Exchange Board of India”. It’s a board constituted by the Central government in 1988 to look after various aspects of the Indian Stock Market. SEBI is a regulatory body that controls Indian Security Market. And, one of the major functions of SEBI is to protect the interest of Investors, that’s you and me.
If you are a new investor. Make habit of visiting NSE, BSE & SEBI websites. It’s the mother of all information that’s concerning the companies listed on the Indian Stock Market. Any and all listed companies, any changes that take place, they (the companies) must intimate the same to the SEBI and respective Exchanges such as NSE & BSE.
- National Stock Exchange (NSE) Website – “nseindia.com“
- Bombay Stock Exchange (BSE) Website – “bseindia.com“
- Securities and Exchange Board of India (SEBI) Website – “sebi.gov“
Trust me on this, you as an investor must know what these changes are. So, make habit of visiting these websites once in a while.