Why the Stock Market?

Savings Account?

Savings account is the normal account any person can open with a bank to safely deposit their hard earned money. This is probably the safest mode to invest money. The banks are regulated by monetary authorities and hence the risk of loosing your money is near zero. They provide you a interest on the balance you have in the account. The interest rate provided is the main tool for attracting customers to deposit their money in banks. This is mostly calculated daily on the account balance and added to the balance monthly. So it's basically earning money with no effort at all. That doesn't sound right, right? Well it doesn't. 

Even the best banks in the world will provide you an interest rate not more than 7%-8% per annum. i you have a balance of $1000 at the beginning of the year, you'd have $1080 at the end. (1000*8%) Of course this is zero-effort money, but is it really enough? The answer is NO. This is because the real value of money is decreasing at a faster rate. Real Value of money is the value of actual goods and services that you can purchase with a given amount of money. The Real Value of money is constantly decreasing, thus creating 'Inflation'. Inflation Rate is the rate at which the prices of commodities increase during a given period of time. In a normal economy the Inflation Rate is almost always above the Bank Interest Rate. This would eventually result in a higher decrease of the 'real value' of the money in your bank, than what the 'interest rate' adds to your bank account. Say we live in an economy with a 10% inflation. So in the above example the bank balance grew by $80 during the year. But due to the inflation, the real value of the balance will decrease by $100 (1000*10%). So eventually resulting in a much less value of money than the amount you had in the beginning. (Real Value of the bank balance at the end of the year = Inflation effect - Interest component = -100+80 = -20). So we can see why it's not financially feasible to lock up your money in a bank account. 

Fixed Deposits?

Sure, FDs give a higher interest rate than a normal savings account. And for a moment let's assume that even the FD interest rate is higher than the Inflation rate which would result in an actual increase in real value of money, but still there's a problem. That is 'Liquidity'. Liquidity is the ability of an asset to be converted to cash with minimum economic and financial loss. In the liquidity department, the FDs do not look nice at all. Because when opening a FD, you sign an agreement with the bank saying that you deposit the money for a specific period of time, it could vary from 3  months to even 10-20 years. Let's assume that a sudden financial requirement pops out and you cancel the FD and withdraw your money before the maturity of the FD, you will only get a normal savings interest rate for your FD. So now it doesn't look that attractive either.

Stock Market?

This is the big YES! The Stock Market is a gold mine to the person who's ready to harvest the gold. Being 'ready' means knowing actually what you are doing in the market. This Blog is a humble attempt to help you get there. So read carefully the articles and try to grasp the psychology behind the market movement. You don't need to remember all these stuff, but let this be a guide to you. All the best!