Why Investing In The Financial Market Essential?

Investing is a way to set aside some money for our future needs. Through investments, we tend to insulate ourselves from any rude shocks like job loss or accidents or death.

Inline with this, investing in financial market-linked vehicles like equities, mutual funds, and bonds is essential for anyone looking to grow their wealth and meet long-term financial goals.

As we are saying this is essential – we need to understand why so?

Investing allows individuals to benefit by participating in the economic growth of the country.

Through general investment(index funds) or specific investment(stocks or thematic mutual funds) – the individual can benefit from growth happening in sectors like construction, manufacturing, power, consumption, and mobility, Pharma, Healthcare, etc.

The above mentioned areas are integral to our life and their availability does impact our daily lives.

Let us try to understand how the individual can benefit by investing for three specific areas:

• Companies involved in building infrastructure(like roads, bridges, and homes) represent growth in construction, which boosts the entire economy. Investments into this sector will bring high returns to the investor if they are from a developing country
• Brands in the FMCG (fast-moving consumer goods) sector benefit as people buy groceries, personal care products, and household items daily. Investments into this sector will bring high returns to the investor if they are from a society which is not cost sensitive, people have money in hand and are brand conscious
• Automotive and transportation companies reflect our mobility needs, whether for commuting or logistics. Investments into this sector will bring high returns to the investor if they are from a society which is transitioning from Carbon/Crude Oil based mobility-Transportation towards Electric Vehicle-Hybrid Vehicles

Apart from riding the wave of consumption, transition or development – another reason to invest is to beat inflation. Inflation erodes purchasing power over time, making it harder to afford the same goods and services.

Equity and bond markets, however, offer returns that can outpace inflation, allowing investors to retain and grow their real wealth.

Also, many financial instruments are tax-efficient, providing benefits such as tax deductions under Section 80C for ELSS (Equity Linked Savings Scheme) mutual funds or tax exemptions on long-term capital gains for certain investments. This makes it easier to keep more of your earnings invested for the long run.

Summary

Investing also allows for targeted wealth creation for attaining goals like child’s education, buying a house, traveling, or retirement.

A diversified investment portfolio can help accumulate funds for these goals. By starting early and staying invested, one can harness the power of compounding and build a financially secure future.

Hope you find this helps

Happy Investing and God Bless!

About the Post Author:

The Author is an AMFI registered Mutual Fund Distributor (ARN-262589). Reach out to him via email: edteficonsult@gmail.com