Five Important Reasons Why You Should Invest Your Money Instead Of Savings

Investing is better than savings even though there are some negative aspects. These are some of the reasons why you should invest any amount you have instead of savings it which in return you get no profit on.

1. Higher Returns: Investing in stocks, mutual funds, or other investment instruments can provide higher returns than keeping money in a savings account. Over a longer period, stocks, bonds, and mutual funds have historically returned an average of 6-8% annually compared to savings accounts’ sub-1% APY.

2. Beat Inflation: Inflation eats away the purchasing power of your money. It leads to higher pricing and lower value. You can offset inflation by investing your money. Over time, if your investments earn a higher rate of return than the annual inflation rate, your money will grow and maintain its value.

3. Compound interest: When you invest, you earn a return on both your initial investment and the return you have made previously. Over time, the compounding of returns can lead to significant gains. You could invest in equity linked saving schemes (ELSS) that offer returns of around 12%, with lock-in periods of three years, allowing for the power of compounding to work its magic.

4. Diversification: Investing your money across different asset classes can reduce your overall investment risk. Investing in a mix of stocks, bonds, and other investments can lower the volatility of your portfolio and provide additional diversification.

5. Tax Benefits: Many types of investment offer tax benefits. For instance, investments such as Equity Linked Savings Schemes (ELSS) can be claimed under section 80C of the Income Tax Act, offering a tax deduction of up to Rs. 1.5 lakh. Investing in other tax-saving investment opportunities like National Pension System or Public Provident Fund, etc. offer additional tax benefits, leading to more cost savings.

In conclusion, investing your money can provide higher returns, beat inflation, give compounding interest, diversify risk, and often offer tax benefits leading to better productivity of the money than a savings account.

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button